We would expect a negative real shock, such as a severe countrywide drought, to result in:

Question

Quizplus · Accepted Answer

A severe countrywide drought would lead to a decrease in agricultural output, which would raise the prices of food and beverages, leading to an increase in the inflation rate. Additionally, the decrease in output would lead to a decrease in the growth rate of output. Therefore, the best choice is D - an increase in the inflation rate and a decrease in the growth rate of output.

We Would Expect a Negative Real Shock, Such as a Severe