In this question we will reflect on the Australian fires from last year. A wide part of
Australia has experienced severe fires in the last year, which made the economy much
less productive and had severe impacts on business activities.
Explain why you could expect negative shifts in the aggregate supply curve
following the fires. What would you expect are the drivers of this shift? Reflect
on each of the components of the aggregate supply and comment on whether
they are likely to change due to the fires. [6 marks]