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How would I find the Keynesian short run aggregate supply curve given that it's operating below...

How would I find the Keynesian short run aggregate supply curve given that it's operating below underemployment?

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Answer #1

Keynesian approach believes that when aggregate demand falls in short run, unemployment and fall in output become visible. If we increase aggregate demand, the whole demand will be converted into rise in supply.

So there is no rise in price level until economy reaches its full potential level.

Following is diagram:

In above given graph, There is no rise in prince until economy reaches the YF. Hence, short run supply curve is horizontal line.

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