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Suppose a country experiences a change in weather patterns that makes farming more difficult. Which eurve(s) in the aggregate
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Answer #1

Following are the factors that affect the Aggregate Demand:

- Consumption spending by households

- Government spending

- Investment spending

- Net Exports

Below are the factors that affect the Aggregate Supply:

- Cost of Inputs

- Technology level

- Import tariff or quotas

- Supply of labor and human capital

Difficulty in doing farming due to change in weather patterns would discourage the farmers to do farming activities. This is a non-price factor which can destroy the farmer's crop. The overall agricultural produce will decrease and the Real Output will decline. This will cause the Aggregate Supply to decrease.

As a result, the AS curve shifts up (to left). Price level increases and real output declines.

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