1632EconomicsMedium
Suppose the economy is initially is long run equilibrium Then suppose there is a drought that destroys much of the wheat crop According to the model of aggregate demand and aggregate supply, what happens of prices and output in the short run?
APrice fall; output rises
BPrice rise; output rises
CPrice fall; output falls
DPrice rise; output falls
Correct answer
D. Price rise; output falls
Explanation
The correct answer is Price rise; output falls.