According to Keynesians, an increase in the money supply will have its greatest impact on GDP when the aggregate demand curve intersects:
A) the vertical portion of the aggregate supply curve.
B) the upward sloping portion of the aggregate supply curve.
C) the horizontal portion of the aggregate supply curve.
D) either the upward sloping or the vertical portions of the aggregate supply curve.
E) either the horizontal or vertical portions of the aggregate supply curve.

Question

Quizplus · Accepted Answer

Keynesians believe that when the aggregate demand curve intersects the horizontal portion of the aggregate supply curve, the economy is below full employment, and increases in the money supply can lead to significant increases in GDP without causing inflation.

According to Keynesians, an Increase in the Money Supply Will