Suppose that a small economy that depends mostly on agriculture experiences a year with exceptionally good conditions for growing crops.The good weather would

Question

Quizplus · Accepted Answer

The good weather will increase the supply of agricultural products and cause a rightward shift in the short-run aggregate supply curve. This will lead to lower prices and lower inflation, shifting the short-run Phillips curve to the left. Therefore, the correct choice is C, which states that the short-run aggregate supply curve shifts to the right, and the short-run Phillips curve shifts to the left.

Suppose That a Small Economy That Depends Mostly on Agriculture