4 . In the discussion of German and Japanese postwar growth, we discussed what h

Question

4 . In the discussion of German and Japanese postwar growth, we discussed what happens when part of the capital stock is destroyed in a war. By contast, suppose that a war does not a§ect the capital stock, but that casualties reduce the labor force. Assume the economy was in a steady state before the war and the saving rate is unchanged. a) What is the immediate impact of the war on total output and on output per person? b) What happens subsequently to output per worker in the postwar economy? Is the growth rate of output per worker after the war smaller or greater than it was before the war?

Explanation / Answer

a) What is the immediate impact of the war on total output and on output per person?

Ouput immediately increases on the declaration of war and output per person also increases

b) What happens subsequently to output per worker in the postwar economy? Is the growth rate of output per worker after the war smaller or greater than it was before the war?

Generally the output falls down after the war since the demand is low. Hence output per worker also falls. This trends have been seen in both world wars

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