What impact does a decline in the supply of resources typically have on the economy?

A decline in the supply of resources generally leads to higher price levels within an economy. This is due to the basic principles of supply and demand; when the availability of resources decreases, the scarcity of those resources can drive their prices up. As suppliers face higher costs for limited resources, they often pass these costs onto consumers, leading to overall inflation in product prices.

Higher price levels can also dampen consumer and business confidence, potentially reducing spending and investment in the economy. While other options might suggest positive outcomes like increased employment or overall growth, these typically don't arise from a decrease in resource supply. In fact, declining resource availability can constrain production capabilities, leading to fewer job opportunities and slower economic growth, rather than enhancing them. Thus, the primary effect of reduced resource supply is an increase in price levels, making it the most accurate choice in this context.