One effect of natural disasters such as hurricanes and earthquakes is the destru

Question

One effect of natural disasters such as hurricanes and earthquakes is the destruction of capital. Use
the equilibrium model of the labor market and the production function to show the long-run effect of a
decrease in the capital stock on (a) employment, (b) output, (c) productivity and (d) the real wage. For
simplicity assume that the quantity of labor supplied is not affected by the real wage.
If instead, the influence of real wages on the quantity of labor supplied is dominated by the substitution
effect, will each of the resulting changes be larger or smaller than the ones in your original answer.
(Include the appropriate diagrams in each case).

Explanation / Answer

Economic growth means the economy

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