Assume Zero Population Growth and Zero Technical Change

question 5

Multiple Choice

Assume zero population growth and zero technical change. If an outbreak of war destroys a large portion of a country's capital stock but the saving rate and the rate of depreciation are unchanged, the growth model predicts that output will:

• A) cease to grow.
• B) grow but the new steady state will be at a higher output level than before.
• C) grow but the new steady state will be at a lower output level than before.
• D) decrease to a new steady state.
• E) grow and the new steady state will be at the same output level as before.

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