Question

If the economy is operating in the Keynesian zone of the SRAS curve and aggregate demand falls, what is likely to happen to real GDP?

Short answer

This will have an effect on the economy.

Step-by-step solution

Step 1. Definition

The SRAS (short-run aggregate supply) curve is a curve that shows that if there is an increase in price level and you will be moving along the SRAS, there will be an increase in the amount of real GDP which will be produced in an economy.

Step 2. Explanation

Because in the Keynesian zone the SRAS curve is horizontal, a decline in AD will slow down real economic activity like production, the flow of goods, and services within the economy. But there will be no effect on the prices.