Question

Notice this is a multiple answers question. Suppose there are two very similar countries (call them G and H). Both countries have the same population and both are experiencing population growth at the same rate (that is, N and 9N are identical in both countries). Both countries depreciate capital at the same rate, the both have the same savings rate, they both have the same technology, and technological progress happens at the same rate in both countries Suppose that currently both countries are in steady state, when an earthquake destroys half of the capital stock of Country G, but does not kill any of its population. We would expect That Country Gs output per effective workerwill grow faster than Country H's only for some time. will grow faster than Country G's only for some time AN That Country H's output (Y) will be higher than Country G's only for some time. That Country H's output (Y) will be higher than Country G's permanently

Answer 1

The correct answers are: a) and d)

Reason: option a) is correct owing to diminishing margianl productivity of capital and option d) is correct as the capital stock of country G has reduced permanently.

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