Suppose a major hurricane hits the eastern coast of Florida and only destroys significant amounts of physical capital.All else the same,real gross domestic product (GDP)will ________ in the short run,and real GDP will ________ in the long run.

Question

Quizplus · Accepted Answer

In the short run, real GDP will decline due to the destruction of physical capital. However, in the long run, the economy will return to the steady state level as rebuilding efforts create new physical capital to replace what was lost. Therefore, real GDP will return to its previous level.

Suppose a Major Hurricane Hits the Eastern Coast of Florida