In the Keynesian model in which the Keynesian short-run aggregate supply curve exists
A) the short-run aggregate supply curve determines real GDP.
B) the aggregate demand curve determines the price level.
C) unemployment cannot persist for long periods of time.
D) aggregate demand determines real GDP per year.

Question

Quizplus · Accepted Answer

In the Keynesian model, the short-run aggregate supply curve is typically horizontal at low levels of output, indicating that prices do not change as demand increases or decreases. This means that the level of real GDP (or output) per year is determined by the level of aggregate demand, not by the supply curve. This is because, in the short run, firms are willing to produce more at the same price level if demand increases.

In the Keynesian Model in Which the Keynesian Short-Run Aggregate