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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

During spring 2016 the Midwestern United States, which has a large agricultural base, experiences above-average rainfall. Using the AD/AS diagram, what is the effect on output, the price level, and employment?

To determine

Impact on output level, price level due to heavy rainfall is to be determined.

Explanation

The Midwestern United States gas a large agricultural base. During the spring of 2014, it is experienced high rainfall. Due to heavy rainfall, it resulted boom for agricultural output, as productivity increased. The additional output is not expected by farmers. So, it is beneficial supply shock for the economy, which leads to rightward shift in AS curve.

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