Question

Pakistan is suffering from an unprecedented catastrophic flood disaster. millions of households witness their properties, assets and wealth washed away. agricultural crops and manufacturing facilities have been wiped out. what would be the impact of this disaster on the economy of pakistan according to the ad – as model? group of answer choices

a. the ad curve remains the same. the sras curve shifts left.
b. the ad curve shifts left. the sras curve remains the same.
c. people in pakistan are desperately in need of vital supplies (e.g., food, medicine, etc).
d. thus, demand increases and the ad curve shifts right. the sras curve shifts left.
e. none of the above (i.e., all of the above answers are incorrect).

Answer 1

According to the AD-AS model, the impact of the catastrophic flood disaster on the economy of Pakistan would be represented by the AD curve shifting left and the SRAS curve remaining the same.

Step-by-step explanation:

The impact of the catastrophic flood disaster on the economy of Pakistan according to the AD-AS model would be represented by option b: the AD curve shifts left and the SRAS curve remains the same.

When a natural disaster like a flood occurs, it leads to a decrease in consumer demand, as people prioritize their immediate needs such as food, shelter, and medicine. This decrease in consumer demand is shown by a leftward shift of the AD (aggregate demand) curve. However, the supply-side of the economy, represented by the SRAS (short-run aggregate supply) curve, remains the same because the disaster does not directly affect the production capacity of the country.

The AD curve shifts left and the SRAS curve remains the same.