If a Natural Disaster Destroys Some of the Capital Stock,then

question 24

Multiple Choice

If a natural disaster destroys some of the capital stock,then the classical model predicts

• A)labor demand,real wages,and output will fall.
• B)labor demand and real wages will rise,output will fall.
• C)the labor market remains unchanged but output falls.
• D)None of the above

---

Definitions:

Balanced Budget Amendment

A proposed amendment to a government's constitution that requires the annual budget to be balanced, so that expenditures do not exceed revenues.

Crowding-out

is an economic theory suggesting that increased government spending leads to a reduction in private sector spending, potentially due to higher interest rates.

Full Employment

A situation in an economy when all available labor resources are being used in the most efficient way possible, typically characterized by the absence of cyclical unemployment.

Annual Deficit

The shortfall in a government's income compared to its spending in a given fiscal year.