Suppose there are two very similar countries call them G and

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 g subscript N 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, and also kills half of its population. We would expect:

A. That Country G\'s output per effective worker (Y/AN) will grow faster than Country H\'s only for some time.

B. That Country H\'s output per effective worker (Y/AN) will grow faster than Country G\'s only for some time.

C. That Country H\'s output (Y) will be higher than Country G\'s only for some time.

D. That Country H\'s output (Y) will be higher than Country G\'s permanently.

Solution

A. YES

because fall in the population the output of G country rise for some time and until the population of both country becomes equal..

B. YES

because the effective output of country H because of the loss of capital in the country G

C. YES

for some time the output of country H will be higher there is lots of capital and the producing labour will be more efficient then the country G

D. unless the labour productivity of the country G is better and the population growth rate rise and labour supply but conutry H growth will remains higer then the G