Suppose the economy is initially is long run equilibrium Then suppose there is a drought that destroys much of the wheat crop According to the model of aggregate demand and aggregate supply, what happens of prices and output in the short run ?

Related Mcqs:

Which of the following statements about economic fluctuations is true ?

A. None of these answers B. A depression is a mild recession C. A variety of spending income, and output measures can be used to measure economic fluctuation because most macroeconomic quantitties tend to fluctuate together D. A recession is when output rises above the natural rate of output...

Which of the following would not cause a shift in the long-run aggregate supply curve ?

A. All of these answers shift the long-run aggregate supply curve B. An increase in the available capital C. An increase in the available labour D. An increase in price expectations...

In the model of aggregate demand and aggregate supply, the initial impact of an increase in consumer optimism is to ?

A. shift the short-run aggregate supply curve to the left B. shift the aggregate demand curve to the right C. shift the short-run aggregate supply curve to the right D. shift the aggregate demand curve to the left...

According to the wealth effect aggregate demand slopes downward (negatively) because ?

A. lower prices increase the value of money holding and consumers spending increase B. lower prices decrease the value of money holding and consumers spending decrease C. lower prices reduce money holding increase lending, interest rates fall and investment spending increase D. lower prices increase money holding decrease lending, interest rates rise and investment spending … According to the wealth effect aggregate demand slopes downward (negatively) because ?Read More...

Suppose the price level falls but because of fixed nominal wage contracts the real wage rises and firms cut back on production This is a demonstration of the ?

A. sticky-wage theory of the short-run aggregate supply curve B. classical dichotomy theory of the short-run aggregate supply curve C. misperceptions theory of the short-run aggregate supply curve D. sticky-price theory of the short run aggregate supply curve...