Question

Suppose a drought in australia has seriously impaired agricultural productivity. How would that impairment in productivity affect short-run aggregate supply?

Answer 1

Suppose a drought in australia has seriously impaired agricultural productivity. This impairment in productivity affect short-run aggregate supply by causing  the short-run aggregate supply curve to shift to the left.

The aggregate supply curve shifts to the left as the price of key inputs rises, making a combination of lower output, higher unemployment, and higher inflation possible to shift to the left.

The aggregate supply model is a model which shows what determines total supply for the economy and how  total supply interact at the macroeconomic level.

The aggregate supply curve shifts to the right as productivity increases or the price of key inputs falls, which will make a combination of lower inflation or  higher output, as well as the  lower unemployment is  possible.

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