Along the Keynesian range of the aggregate supply curve, an increase in the aggregate demand curve will increase:
A) both the price level and real GDP.
B) only real GDP.
C) only the price level.
D) real GDP and reduce the price level.

Question

Quizplus · Accepted Answer

In the Keynesian range of the aggregate supply curve, the economy is below full employment, and firms can increase output without raising prices. Therefore, an increase in aggregate demand will increase real GDP without affecting the price level.

Along the Keynesian Range of the Aggregate Supply Curve, an Increase