Assume that an economy is currently in long-run

equilibrium and the short-run aggregate supply

curve is upward sloping. An adverse supply

shock, such as a drought, will most likely cause

which of the following to the economy in the

short run?

(A) A decrease in the price level and a decrease

in the nominal wage

(B) A decrease in the price level and an increase

in the nominal wage

(C) An increase in the price level and an increase

in the nominal wage

(D) An increase in the price level and an increase

in the real wage

(E) An increase in the price level and a decrease

in the real wage