The Keynesian short-run aggregate supply (SRAS) curve
A) shows that real Gross Domestic Product (GDP) will increase only if the price level increases.
B) assumes a full-employment level of real Gross Domestic Product (GDP).
C) is horizontal.
D) does not reflect any changes in nominal Gross Domestic Product (GDP).

Question

Quizplus · Accepted Answer

The Keynesian SRAS curve is horizontal, meaning that changes in the price level do not impact the level of real GDP produced in the short-run. This is because, according to Keynesian theory, there are unemployed resources in the economy that can be utilized to increase output without increasing prices.

The Keynesian Short-Run Aggregate Supply (SRAS) Curve