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Figure: Classical Versus Keynesian Macroeconomics
-(Figure: Classical Versus Keynesian Macroeconomics) Look at the figure Classical Versus Keynesian Macroeconomics. According to the Keynesian view, if this economy shifts from AD₁ to AD₂ because of a large decline in investment spending by businesses, the price level will _____, but real GDP will _____.

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Figure: Classical Versus Keynesian Macroeconomics

-(Figure: Classical Versus Keynesian Macroeconomics) Look at the figure Classical Versus Keynesian Macroeconomics. According to the Keynesian view, if this economy shifts from AD₁ to AD₂ because of a large decline in investment spending by businesses, the price level will _____, but real GDP will _____.

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According to the Keynesian view, a large decline in investment spending by businesses would lead to a decrease in Aggregate Demand (AD). This would shift the AD curve leftward from ADS1U1B11 to ADS1U1B12. As a result, both the price level and real GDP will decrease. Therefore, the correct answer is option D.

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