Notice this is a multiple answers question. Suppose there are two very similar c

Question

Notice this is a multiple answers question. 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 9N 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, but does not kill any of its population We would expect That Country G's output per effective workerll will grow faster than Country H's only for some time. AN That Country H's output per effective workerwill grow faster than Country G's only for some time That Country H's output (Y) will be higher than Country G's only for some time. That Country H's output (Y) will be higher than Country G's permanently AN

Explanation / Answer

The country G's output per effective worker Y/AN will grow faster than country H's only for some time.

Decrease in capital will decrease output, Y but there is no change in AN, so Y/AN will decrease.

According to convergence principle country with lower output per worker will grow faster and reaches the steady state.

So till it reaches country G grows faster and after steady state both countries grow at same rate.

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