Answer :
(a) Following a natural disaster or war that damages the nation's capital stock, both capital and output per worker will initially decrease. As the economy recovers and capital is restored, both indicators will slowly rise but might not fully reach their pre-disaster levels.
(b) Over time, capital and output per worker are expected to stabilize at a new equilibrium, possibly below the pre-disaster levels. The long-run impact will be influenced by the effectiveness of the economy's recovery, resource availability for rebuilding, and the disaster's effects on investor confidence and productivity.
(a) When a natural disaster or war destroys a portion of the nation's capital stock, it disrupts the economy's productive capacity.
With fewer capital goods available, both capital per worker and output per worker will decline initially. The immediate impact can lead to reduced production and economic contraction.
As time progresses, the economy will engage in recovery efforts, which may include rebuilding damaged infrastructure and replacing lost capital goods.
This gradual replenishment of capital will contribute to the increase in both capital per worker and output per worker.
However, reaching the pre-disaster levels may take a considerable amount of time, especially if the destruction was extensive.
(b) In the long run, the economy is expected to settle into a new steady state.
The rate of capital accumulation will determine the final level of capital per worker, and technological progress and efficiency gains will influence the output per worker.
If the recovery process is effective and resource allocation is efficient, the economy may stabilize at a new equilibrium with a lower but sustainable level of capital per worker and output per worker.
However, reaching this new equilibrium may be influenced by various factors.
Limited resources, changes in investment patterns, and potential shifts in the allocation of labor and capital may all play roles in determining the long-run effects of the disaster on capital and output per worker.
A natural disaster or war that destroys some of the nation's capital stock will initially lead to a decline in both capital and output per worker.
In the long run, the economy is likely to reach a new steady state, but the quantity of capital per worker and output per worker may be lower than before the disaster, influenced by the effectiveness of recovery efforts and other economic factors.
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