Question

Why do you suppose that a number of economists are advising the Bank of Japan to boost the nation's money supply when the government implements its additional consumption tax increase?

Short answer

In short term, real$GDP$ will decrease. This arises because a drought will result in a scarcity of products, causing individuals to pay higher prices for the less supply.

Step-by-step solution

Step: 1 Discussion:

The optimum gross Domestic product and the optimum price level in the economy are determined by the interplay of aggregate output. Both the market price and real $GDP$ are affected by a shift in any of the two curves. Many companies rely on water as their lifeblood and primary raw material. The process of production will be hampered by a lack of water resources.

Step: 2 Conclusion:

This predicts that in the short run, the supply curve may shift to right left. In the short term, real $GDP$ will decrease. This arises because a drought will result in a scarcity of products, causing individuals to pay higher prices for the less supply.