The Keynesian aggregate supply curve is A) vertical. B) upward sloping. C) horizontal until Natural Real GDP (Q_N)and vertical at Q_N. D) sometimes upward sloping and sometimes horizontal. E) downward sloping.

Question

Quizplus · Accepted Answer

The Keynesian aggregate supply curve is horizontal until the economy reaches its potential output (Natural Real GDP), where it becomes vertical. This is because Keynesians believe that in the short run, changes in aggregate demand can lead to changes in output and price level without affecting the level of potential output. However, in the long run, the economy will always return to potential output and the aggregate supply curve becomes vertical. Therefore, the answer is C.

The Keynesian Aggregate Supply Curve Is