The basic Keynesian model explains how an increase in planned aggregate expenditure can cause a(n)________ as producers increase production at preset prices to meet the higher demand and actual output ________ the potential output.

Question

Quizplus · Accepted Answer

An increase in planned aggregate expenditure would cause a shift in the aggregate demand curve to the right, resulting in an expansionary gap where actual output rises above potential output due to increased production at preset prices to meet the higher demand.

The Basic Keynesian Model Explains How an Increase in Planned