Suppose a major hurricane hits the eastern coast of Florida and only destroys significant amounts of physical capital.All else the same,in the short run,we can expect the marginal product of capital to ________ and investment will ________.

Question

Quizplus · Accepted Answer

The destruction of physical capital reduces the amount of capital available, which increases the marginal product of the remaining capital due to its scarcity. This incentivizes investment to replace the lost capital, leading to an increase in investment.

Suppose a Major Hurricane Hits the Eastern Coast of Florida