Question

Suppose that there is a natural disaster that destroys part of the nation’s capital stock.
(a) Determine the effects on aggregate output, consumption, employment, and the real wage, with reference to income and substitution effects, and explain your results.
(b) Do you think that changes in the capital stock are a likely cause of business cycles? Explain with reference to your answer to part (a) and the key business cycle facts described in Chapter.



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  • CreatedDecember 05, 2014
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