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 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. This means that as aggregate demand increases, firms will be able to increase their production and output, resulting in an increase in overall real GDP. This relationship only holds in the short run, however, as in the long run, wages and prices are able to adjust, and so the aggregate supply curve becomes vertical.

Which One of the Following Statements Is True