What is an example of a positive external shock to aggregate supply?

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A. Good weather leads to an unusually productive harvest for corn farmers. ****

B. A popular new diet encourages consumers to buy more corn flakes.

C. Demand for new suburban houses increases the value of farmland.

D. China announces that it plans to import more corn from the United States.

Correct.

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The correct answer is A. Good weather leads to an unusually productive harvest for corn farmers.

To understand why this is a positive external shock to aggregate supply, we need to understand what aggregate supply is. Aggregate supply refers to the total amount of goods and services that suppliers in an economy are willing and able to produce at a given price level.

An external shock is an event that impacts the economy from the outside and causes a significant change in economic variables. In this case, good weather leading to an unusually productive harvest for corn farmers is an external shock because it is an unforeseen event that directly affects the agricultural sector.

When corn farmers have a productive harvest due to favorable weather conditions, they are able to produce a larger quantity of corn. This increase in corn supply will decrease the cost of production for corn-based products and lower the prices of other goods that use corn as an input.

As a result, the aggregate supply of goods and services in the economy will increase. Suppliers will be able to produce more output at a given price level, leading to an expansion in economic activity and potentially higher real GDP.

To answer this question correctly, you need to understand the concept of aggregate supply, identify the external shock, and analyze how it affects the economy.