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Drought In California's Negative Consequences

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SHIFT IN AGGREGATE AGRICULTURAL SUPPLY IN CALIFORNIA DUE TO DRAUGHT AND ITS POTENTIAL CONSEQUENCES
Investopedia defines aggregate supply as "the total supply of goods and services produced within an economy at a given overall price level in a given time period”.
The Atlantic.com states that the state of California is the fifth supplier of food in the world. The majority of the almonds, artichokes, lemon, pistachios and tomatoes consumed in the United States, are grown in California. The state also grows spinach, broccoli, grapes, oranges, walnuts, apricots, dates, figs, olives, prunes, avocados, lemons, melons, peaches, plums and strawberries. Agriculture in the state consumes 41% of the water supply.
The ongoing drought in California is causing water shortages for farms .Bad weather has a negative effect on short run aggregate supply of produce, causing the aggregate supply curve to shift to the left, with a decrease of output and an increase in prices.
A negative shift in aggregate supply is called a supply shock. Supply shocks are events which alter the output of a certain good or service without affecting the productive capacity of the economy. The drought in California is a supply shock that temporarily decreased the crop output due to …show more content…

According to Keynesian theory, the government should intervene to prevent higher unemployment by increasing aggregate demand to counteract the effect of the drought. This can be achieved by increasing the money supply into the economy in order to shift the aggregate demand curve upwards to bring the economy back to its original state before the drought. The state and federal governments can infuse money into the economy by launching drip irrigation and water conservation programs and subsidies to switch to less water consuming crops. If successful, prices will fall and the output will eventually return to the point where it was before the drought period

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