Which one of the following statements is TRUE?
A) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that domestic workers are harmed by imports.
B) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that there is no correlation between the level of real GDP and the employment level.
C) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that increases in aggregate demand can boost output in the short term.
D) The shape of the Keynesian short-run aggregate supply curve is based on the conclusion that increases in aggregate demand will increase the price level, but will leave real GDP unaffected in the short term.

Question

Quizplus · Accepted Answer

The Keynesian short-run aggregate supply curve is upward-sloping because Keynesians believe that increases in aggregate demand can boost output in the short term. This is due to the belief that there may be idle resources or unemployed workers in the economy that can be put to use with increased demand. As a result, businesses increase production in the short run to meet the higher demand, leading to higher output.

Which One of the Following Statements Is TRUE