In the fixed-price Keynesian model, what would be the impact of an increase in aggregate expenditure on the aggregate demand curve and real GDP?
A)The aggregate demand curve would shift rightward and real GDP would increase.
B)The aggregate demand curve would shift leftward and real GDP would decrease.
C)The aggregate demand curve would shift rightward and real GDP would decrease.
D)The aggregate demand curve would shift leftward and real GDP would increase.
E)The aggregate demand curve and real GDP would both remain constant.

Question

Quizplus · Accepted Answer

In the fixed-price Keynesian model, an increase in aggregate expenditure would lead to an increase in aggregate demand. This increase in aggregate demand would cause the aggregate demand curve to shift rightward, leading to an increase in real GDP. Therefore, the best choice is A: The aggregate demand curve would shift rightward and real GDP would increase.

In the Fixed-Price Keynesian Model, What Would Be the Impact