An increase in the price level and a decrease in real GDP in the short run could be created by
A)an increase in the money supply.
B)an increase in government expenditures.
C)a fall in stock prices.
D)bad weather in farm states.

Question

Quizplus · Accepted Answer

Bad weather in farm states can cause a decrease in the supply of agricultural products, leading to higher prices for these goods, which then usually leads to an overall increase in the price level. At the same time, a decrease in agricultural production can also reduce real GDP in the short run. Options A and B would actually increase real GDP, while option C might affect wealth, but not necessarily overall output and prices in the economy.

An Increase in the Price Level and a Decrease in Real