Government spending increases
This is where the Keynesian framework differs radically from others. Under this framework this increase in government spending is an increase in aggregate demand, as the government is now demanding more goods and services. So we should see Real GDP rise as well as the price level.This is generally all that is expected in a 1st year college answer. There are larger issues here, though, such as how is the government paying for these expenditures (higher taxes? deficit spending?) and how much government spending chaces away private spending. Both those are issues typically beyond the scope of a question such as this.
