Which of the following will most likely result from an unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas?
A) a decrease in inflation
B) a decrease in unemployment
C) a decrease in the general level of prices
D) an increase in the general level of prices

Question

Quizplus · Accepted Answer

An unanticipated decrease in aggregate supply due to unfavorable weather conditions in agricultural areas would result in a decrease in the availability of agricultural products, leading to an increase in the cost of production for firms that use these products as inputs. Thus, firms would be forced to increase the prices of their products and services to maintain their profit margins. This would lead to an increase in the general level of prices, or inflation.

Which of the Following Will Most Likely Result from an Unanticipated