Final answer:
In the short run, a decrease in aggregate demand within the Keynesian zone of the SRAS curve will likely lead to a decline in real GDP and a decrease in prices. However, according to neoclassical perspectives, wages and prices will eventually adjust, leading the economy back to its potential GDP in the long run.
Step-by-step explanation:
If the economy is operating in the Keynesian zone of the SRAS curve and aggregate demand falls, real GDP is likely to decrease in the short run. According to Keynesian economics, a downturn in demand typically leads to a reduction in production, resulting in lower GDP levels because firms respond to reduced demand by scaling back output. In this scenario, prices tend to remain relatively sticky downwards, meaning they do not decrease immediately in response to the fall in demand. Over time, however, the increased unemployment and the excess capacity might lead to declining wages, which can cause the short-run aggregate supply curve to shift rightward, allowing the real GDP to return to its potential level. During this process, there is downward pressure on the price level, leading to deflation or declining inflation rates.
In the neoclassical perspective, while there can be a short-run impact on output and unemployment due to changes in aggregate demand, in the long run, wages and prices adjust, and the economy tends to return to its potential GDP. Thus, changes in aggregate demand have a temporary impact on real GDP's size, but the long-term determinants of real GDP are potential GDP and aggregate supply.