An increase in the price level and a reduction in output would result from

Question

a.

a fall in stock prices.
b.

bad weather in farm states.
c.

an increase in government expenditures.
d.

an increase in the money supply.

Answer 1

An increase in the price level and a reduction in output typically reflects a scenario characterized by supply-side constraints or negative supply shocks. Among the options provided, b. bad weather in farm states would most likely lead to a reduction in agricultural output, which can push prices up due to decreased supply of food and related goods. Therefore, the correct answer is:

b. bad weather in farm states.