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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 classical view, if this economy shifts from AD₂ to AD₁, perhaps because of a large increase in government spending, the price level will _____ and 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 classical view, if this economy shifts from AD₂ to AD₁, perhaps because of a large increase in government spending, the price level will _____ and real GDP will _____.

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According to the classical view, the economy is always at full employment, so an increase in aggregate demand (AD) will only lead to a rise in the price level, with no change in real GDP.

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