Suppose that a small economy that produces mostly agricultural goods experiences a year with exceptionally good conditions for growing crops.The good weather would

Question

Quizplus · Accepted Answer

The good weather will increase the productivity of the agricultural sector, leading to an increase in the overall output of the economy. This will shift the short-run aggregate supply curve to the right. However, as output increases, the downward pressure on prices may increase, leading to a lower level of inflation in the short run. This would cause the short-run Phillips curve to shift to the left. Therefore, the correct answer is C.

Suppose That a Small Economy That Produces Mostly Agricultural Goods