Answer to Question #150850 in Macroeconomics for Elizabeth Oladipo

Question

Use the Solow model to evaluate whether each of the following statements is true, false,
or uncertain. Give the economic reasons of your answers. (25 marks each)

(a) “A natural disaster has just destroyed some of the capital stock of a country, it will
lead to a reduction in the growth rate of output per worker and a deterioration of
economic welfare of the country.”

Answer 1

True,

This is because disaster may lead to damages of the key factors of production hence affecting production and the lower the economic activity in a region the lower the economic growth as well