An increase in the price level and a reduction in output would result from
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 would reduce the output of agricultural goods, leading to a decrease in aggregate supply. This, in turn, would lead to an increase in the price level and a reduction in output, as the economy moves up along the aggregate demand curve. The other options do not necessarily lead to both an increase in the price level and a reduction in output.

An Increase in the Price Level and a Reduction in Output