Check all that apply: Suppose there are two very similar countries (call them G

Question

Check all that apply:

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 gN 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 hits both countris. In country G it destroys half of the capital stock, but does not kill any of its population. In country H it kills half of the population, but it does not affect the country's capital stock. We would expect That Country G will experience a period of increase in capital per effective worker AN That Country H will experience a period of increase in capital per effective worker AN That Country G will experience a period of decrease in capital per effective worker AN That Country H will experience a period of decrease in capital per effective worker AN

Explanation / Answer

Since capital stock is destroyed in Country G there capital per effective worker will decrease and similarly for country H since Population is destroyed their capital per effective worker will increase.

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