In Keynesian theory, why is the aggregate supply curve horizontal in the short run?

When in macroeconomics an economy ‘overheats’ it is observed that aggregate demand exceeds national income at the full employment output level. Within a ‘Keynesian cross’ framework this overheating is described as which of the following: (a)  A Goldilocks effect; (b)  A hyperinflation; (c)  A recessionary gap; (d)  An inflationary gap Please illustrate the correct answer via a diagram.

Please let me know if my answer is correct. I am between C and D. If you can please also let me know why the other choices aren't correct

Which of the following would cause the dynamic DAD curve to shift in (back)? A) a decrease in consumer confidence. B) a decrease in the inflation rate. C) an increase in consumer wealth. D) an increase in the short-run aggregate supply (SRAS) curve.

Refer to the diagram. The initial aggregate demand curve is AD1 and the initial aggregate supply curve is AS1. In the long run, the aggregate supply curve is vertical in the diagram because:     A)  nominal wages and other input prices are assumed to be fixed.   B)  real output level Qf is the potential level of output.   C)  price level increases produce perfectly offsetting changes in nominal wages and other input prices.   D)  higher than expected rates of actual inflation reduce real output only temporarily.

From the list below, choose ONE answer that best describes what would occur INITIALLY in the following AD (aggregate demand) AS (aggregate supply)" situation(s). A large fall in interest rates stimulates capital spending 0 O U Shift to the right of the AS curve Move to the right (up) along the AS curve Shift to the right of the AD curve Shift to the left of the AS curve Move to the left (down) along the AS curve Move to the right (down) along the AD curve Shift to the left of the AD curve Move to the left (up) along the AD curve

The U.S. economy is initially in short-run macro-equilibrium.  Assume oil prices fall.  As a result, we observe the following in our economy   Question 2 options:   a)  Both the price level and real GDP decrease   b)  The price level falls and real GDP increases   c)  The price level increases and real GDP falls   d)  Both the price level and real GDP increase.

Start at full-employment (FE) equilibrium with flexible wages and worker misperception of price level changes in the short run. Suppose then that we have an increase in Aggregate Demand. First, think about the short-run effects on price level (P), output level (Q), wage level (W), employment (L), and unemployment (U)?             In the long run, once workers realize that there was a change in the price level, they will change the supply curve of labor. When all subsequent wage and price adjustments take place, we will be in a new long-run equilibrium. From the original full-employment (FE) equilibrium to the final one, what is the net change in the price level (P), output level (Q), the nominal wage (W), employment (L), unemployment rate (U), and the real wage (W/P)?   Group of answer choices a) An increase in P, no change in Q, no change in W, an increase in L, an increase in U and no change in W/P. b) An increase in P, a decrease in Q, a decrease in W, a decrease in L, an…

Which characteristics are associated with the Keynesian theory? Choose all that apply. Group of answer choices Flexible prices Long-run view Long-run aggregate supply primarily affects economic growth (real GDP) Short run view Aggregate demand primarily affects economic growth (real GDP) Inflexible prices

Consider a closed economy, where wages are sticky in the short run. The consumption function is C = co+c₁(Y-T), where the marginal propensity to consume c₁ is equal to 0.8. Initially the economy is in equilibrium at Y = Y* and P = Pº, where Pe is the price level that was expected when agents agreed their fixed nominal wage contracts. The short-run aggregate supply curve (SRAS) is horizontal. Suddenly the government increases government spending G by $200. For the following questions, if you think a variable goes up by (say) $50, just enter 50 as your answer. If you think a variable goes down by $50, enter -50 as your answer. If you think a variable doesn't change at all, enter 0 as your answer. 10. By how much will output Y change in the short run? 11. By how much will consumption C change in the short run? 12. By how much will investment I change in the short run? 13. By how much will output Y change (compared to its initial level before the change in G) in the long run, after wage…