Answer:
Given that the economy is operating in the horizontal section of the aggregate supply curve in the simple Keynesian model, an increase in spending will lead to __________no change in price level and an increase in real GDP__________ (assuming that the economy remains in the horizontal section of the aggregate supply curve).
Explanation:
When the aggregate supply curve shifts outward, the economy's output and real GDP increase at a given price in the short-run when aggregate supply is determined by price. Â But with the simple Keynesian model, price does not influence supply as there is an equilibrium in the aggregate expenditures and output in the economy.
