According to the Keynesian Model, the Short-Run Aggregate Supply (SRAS)

question 360

Multiple Choice

According to the Keynesian model, the short-run aggregate supply (SRAS) curve is horizontal when

• A) real Gross Domestic Product (GDP) is at full capacity but prices are not flexible.
• B) there are no unemployed resources and wages do not change when prices change.
• C) prices react to an aggregate demand shock but real Gross Domestic Product (GDP) does not.
• D) there are unemployed resources and prices do not fall when aggregate demand falls.

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