According to Keynes, if there is unemployment, then an increase in aggregate demand will:
A) decrease output and increase the price level.
B) decrease the price level and increase output.
C) increase output but not the price level.
D) increase the price level but not output.

Question

Quizplus · Accepted Answer

According to Keynesian economics, if there is unemployment (meaning the economy is not at full capacity), an increase in aggregate demand will primarily increase output without significantly affecting the price level, as firms can increase production to meet higher demand without needing to raise prices.

According to Keynes, If There Is Unemployment, Then an Increase