Question 1) Suppose the Australian economy now faces a severe drought. Explain, with reference to the multiplier effect, how this will impact output, income, and unemployment.

Question 2) Assuming a product sold operates in a perfectly competitive market, explain the effect of the Drought, outlined in question 1 above, on the market for the product. How is this represented on a demand and supply diagram?

Question 3) As a result of the effect on the market, explain how the drought might affect the pricing and production of the product. Question 4) How does the drought affect a business financially?