If global pollution causes climatic changes that permanently harm crop production worldwide,aggregate supply and demand analysis would lead us to expect
A)increases in the price level
B)decreases in the price level
C)outward shifts of the aggregate demand and supply curves
D)a leftward shift of the aggregate demand curve along a vertical aggregate supply curve
E)an increase in the potential level of real GDP

Question

Quizplus · Accepted Answer

A reduction in crop production worldwide would lead to an increase in the price level as the supply of crops decreases. With aggregate supply and demand analysis, we would expect a movement up along the vertical aggregate supply curve, with prices increasing without a corresponding increase in output. This would lead to inflationary pressures on the economy. Therefore, option A is the correct answer.

If Global Pollution Causes Climatic Changes That Permanently Harm Crop