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Employ the aggregate demand and supply model for the Australian economy, to analyse the consequences for...

Employ the aggregate demand and supply model for the Australian economy, to analyse the consequences for real GDP and the general price level of the following a drought and the fall in agricultural output.

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When there is a fall in the agricultural output due to supply shock such as drought would lead to truncation in the supply of agricultural output hence a leftward shift in the SRAS or short-run aggregate supply curve implies a demand for agricultural output is greater than supply leads to an increase in price level to reduce excess demand and reach equilibrium in the economy.

SRASA RAS

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