Discussion
According to Keynes the short run aggregate supply curve is:
Answer: B
According to Keynes the short run aggregate supply curve is horizontal up to full employment, because with unemployed resources firms can increase output without raising the price. The key gives horizontal, option B. The classical view is a vertical supply curve and the usual short run view is upward sloping. At that level of output, firms can supply more without raising the price, because there are unused resources.
At full employment the aggregate supply curve becomes vertical, and a rise in demand then raises only prices.
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