Suppose That Droughts in the Prairies and Floods in Ontario

question 105

Essay

Suppose that droughts in the Prairies and floods in Ontario substantially reduce food production in Canada.Use the aggregate demand-aggregate supply model to illustrate graphically the impact in the short run and the long run of this adverse supply shock.Be sure to label:
i.the axes
ii.the curves
iii.the initial equilibrium values
iv.the direction the curves shift
v.the short-run equilibrium values
vi.the long-run equilibrium values.State in words what happens to prices and output in the short run and the long run.

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Definitions:

Security Interest

A legal claim on assets granted to a creditor to secure a debt or obligation, providing the right to take property upon failure to repay.

Contribution

The right of insurers (more than one) to share a loss where the policies so provide.

Insurers

Companies or entities that provide insurance coverage to individuals, businesses, or other organizations in exchange for premiums.

Co-insurance

An insurance arrangement where the risk is shared between the insurer and the insured, often requiring the insured to pay a specified percentage of the costs of a claim.