An abnormally large grain crop due to highly favorable weather conditions in the Midwest is an example of
A) a technological improvement that will increase long-run aggregate supply.
B) a supply shock that will increase short-run aggregate supply.
C) an unexpected development that will reduce the natural rate of unemployment.
D) an unexpected development that will lead to excess supply and widespread unemployment.

Question

Quizplus · Accepted Answer

An abnormally large grain crop due to highly favorable weather conditions in the Midwest is an example of a positive supply shock that will increase short-run aggregate supply, as it increases the quantity of goods supplied and reduces the cost of production for firms in the agricultural industry. However, it may not necessarily increase long-run aggregate supply, as it is a temporary event and not a permanent technological improvement. It is also unlikely to directly affect the natural rate of unemployment or lead to excess supply and widespread unemployment.

An Abnormally Large Grain Crop Due to Highly Favorable Weather