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5. Gardenia recently experienced a devastating tsunami which destroyed 30% of its capital stock, but fortunately, thanks to advance warnings, evacuation efforts were successful, and the labour force has remained unchanged (at its initial level). Assume that in Gardenia output is produced according to the Cobb-Douglas production function given above and that a=0.3 and b=0.7 . Under these circumstances the following changes are expected in the Gardenian economy: (Hint: in Q5-Q7 express the new levels of K and L in terms of the old (i.e., initial) values. For example, KNEW = 0.7KOL.D.) A) total output and the real wage will both fall by about 10%. B) total output will fall by about 28% while the real wage will increase by about 28% C) total output will fall by about 15% while the real wage will remain unchanged. D) total output will fall by about 30% while the real wage will increase by about 30% 6. Following on Question 5, given that 30% of Gardenia's capital stock was destroyed while its labour force remained unchanged (at its initial level), the real rental rate in Gardenia will A) fall by about 10% B) increase by about 28% C) fall by about 28% D) increase by about 10% 7. Now in a turn of luck, Gardenia was quickly able to restore the capital stock destroyed by the tsunami so that the capital stock has returned to its initial level (its level before the disaster). In addition, Gardenian scientists discovered a cure to a widespread disease. This will permit the Gardenian labour force to be 20% higher. What will happen to the real rental rate in Gardenia as a result of this increase in the labour force? A) It will remain unchanged B) It will fall by 15.7% C) It will increase by 5.6% D) It will increase by 13.6%