An increase in the price level and a reduction in real GDP could be created by
A)a fall in stock prices.
B)natural disasters such as hurricanes and famines.
C)declining government expenditures.
D)tax rebates.

Question

Quizplus · Accepted Answer

Natural disasters such as hurricanes and famines can disrupt production and supply chains, leading to a reduction in real GDP. At the same time, the destruction caused by these disasters can increase demand for goods and services, leading to an increase in the price level.

An Increase in the Price Level and a Reduction in Real