An abnormally large grain crop due to highly favorable weather conditions in the Midwest is an example of a(n)
A)technological improvement that will increase long-run aggregate supply.
B)supply shock that will increase short-run aggregate supply.
C)unexpected development that will reduce the natural rate of unemployment.
D)unexpected development that will lead to excess supply and widespread unemployment.

Question

Quizplus · Accepted Answer

An abnormally large grain crop due to highly favorable weather conditions in the Midwest is a positive supply shock. This increases short-run aggregate supply as firms experience lower costs of production and are able to increase outputs without raising prices. However, this does not necessarily lead to a reduction in the natural rate of unemployment or excess supply and widespread unemployment. It also does not qualify as a technological improvement that will increase long-run aggregate supply.

An Abnormally Large Grain Crop Due to Highly Favorable Weather