Unit 3 → Subtopic 3.4
Natural Disasters’ Impact on Aggregate Supply
Natural disasters, such as hurricanes, earthquakes, floods, and wildfires, have significant economic consequences, particularly affecting Aggregate Supply (AS) by disrupting production, damaging infrastructure, and increasing costs for businesses. When a natural disaster strikes, factories shut down, supply chains are disrupted, and labor productivity declines, leading to a reduction in Short-Run Aggregate Supply (SRAS). In some cases, long-term economic damage can alter Long-Run Aggregate Supply (LRAS) by permanently reducing an economy’s productive capacity. This project challenges students to investigate how natural disasters impact aggregate supply and what governments and businesses do to recover from these economic shocks.
Students will examine the short-term and long-term effects of natural disasters on supply chains, production costs, labor availability, and investment patterns. They will analyze real-world case studies, such as Hurricane Katrina (2005), the Fukushima earthquake and tsunami (2011), and the Australian wildfires (2019-2020), to understand how economies react to sudden supply-side shocks. The role of government intervention, such as emergency stimulus packages, rebuilding efforts, and supply-side policies, will also be explored. A key focus of this project will be determining whether economies fully recover from supply-side disruptions or if permanent economic shifts occur.
The final investigation report should assess the overall impact of natural disasters on aggregate supply, using economic theory to explain why some economies bounce back quickly while others experience prolonged stagnation. The goal is to provide a well-researched analysis of how supply-side economic forces interact with external shocks, shaping national and global economies.
Recommended Procedure:
Research How Natural Disasters Affect Aggregate Supply – Study how disruptions in production, infrastructure damage, and labor shortages impact short-run and long-run aggregate supply.
Analyze Case Studies of Past Natural Disasters – Examine economic consequences from events like Hurricane Katrina, the 2011 Japan earthquake, and the COVID-19 pandemic.
Evaluate the Short-Term and Long-Term Effects – Assess how disasters cause supply chain disruptions, price volatility, and shifts in government spending.
Investigate Government and Business Responses – Look into policies such as disaster relief funding, rebuilding programs, and supply chain diversification.
Write an Investigation Report on Economic Resilience – Summarize findings and discuss strategies economies can adopt to mitigate supply-side shocks.
Suggested Sources:
Understanding Aggregate Supply Shocks from Natural Disasters:
Investopedia: How Natural Disasters Impact Supply Chains – https://www.investopedia.com
Khan Academy: Short-Run and Long-Run Aggregate Supply – https://www.khanacademy.org
2. Case Studies on Natural Disasters and Supply Chain Disruptions:
The Balance: Economic Effects of Natural Disasters – https://www.thebalancemoney.com
Harvard Business Review: Lessons from Supply Chain Failures After Natural Disasters – https://hbr.org
3. Government and Business Strategies for Managing Supply Shocks:
World Bank: How Governments Respond to Economic Shocks – https://www.worldbank.org
OECD: The Role of Policy in Reducing Supply Chain Vulnerability – https://www.oecd.org
4. Long-Term Economic Impacts of Natural Disasters:
IMF: How Natural Disasters Reshape Economies – https://www.imf.org
United Nations: Disaster Risk Reduction and Economic Stability – https://www.un.org
Grading Rubric:
Total Points: __ /20
