If the economy starts at a long-run equilibrium and then experiences a drought that severely damages the wheat harvest, what is the short-run effect on prices and output according to the aggregate demand and aggregate supply model?

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Prices increase; output decreasesPrices decrease; output increasesPrices increase; output increasesPrices decrease; output decreasesNo change in prices or output

Explanation

A drought that destroys a significant portion of the wheat crop reduces aggregate supply, causing prices to rise and output to fall in the short run.