Final answer:
The Keynesian zone of the SRAS curve indicates a period of underemployment and recession, where price levels remain relatively stable regardless of shifts in aggregate demand. Thus, inflationary pressure is low, and the equilibrium level of real GDP is far below potential GDP.
Step-by-step explanation:
The Keynesian zone of the Short-Run Aggregate Supply (SRAS) curve refers to the portion on the far left which is relatively flat. This zone indicates that the economy is operating with a high level of cyclical unemployment and below its potential output, typically characterizing a recessionary period. When it comes to the price level, this zone is marked by relatively stable prices, implying that even if the aggregate demand were to increase or decrease, it would have a minimal impact on the overall price level. Instead, the primary effect would be on the output level Yk.
In terms of the options provided, the correct answer is (b) Zone of recession; significant price decrease is incorrect since the Keynesian zone is characterized by moderate price changes rather than significant ones. Therefore, the best fitting response based on the context would be (d) Zone of underemployment; moderate price change, but it is important to highlight that the price changes are minimal rather than moderate. This is because the Keynesian zone mainly covers the range where changes in aggregate demand affect output without causing significant inflationary or deflationary pressures.