According to Keynesian economics, if there are unutilized resources in the economy and aggregate demand increases
A) real GDP will rise and price level will remain constant.
B) real GDP will fall and price level will remain constant.
C) real GDP will rise and price level will rise.
D) real GDP will rise and price level will fall.

Question

Quizplus · Accepted Answer

Keynesian economics argues that in the short run, an increase in aggregate demand will lead to an increase in real GDP, but with a relatively small increase in the price level. This is because there are still unutilized resources in the economy, such as unemployed workers or idle factories, that can be put to use to meet the increased demand without significantly driving up prices. Therefore, choice A is the correct answer.

According to Keynesian Economics, If There Are Unutilized Resources in the Economy