Question

According to the simple Keynesian model, increases in AD that occur at Potential GDP will have...

According to the simple Keynesian model, increases in AD that occur at Potential GDP will have what impact on price level?

a.

Increase price level.
b.

Decrease price level.
c.

Not enough information.
d.

Have no impact on price level.
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Answer #2

Q. According to the simple Keynesian model, increases in AD that occur at Potential GDP will have what impact on price level?

Answer- (A) Increase price level.

Note- An increase in any of the components of aggregate demand shifts the AD curve to the right. When the AD curve shifts to the right it increases the level of production and the average price level. When an economy gets close to potential output, the price will increase more than the output as the AD rises.

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