An earthquake destroys a good portion of the capital stock.How would you expect this to affect the capital-labor ratio in the long run? There would be
A)a rightward movement along the saving-per-worker curve and an increase in the capital-labor ratio.
B)no change in the long-run capital-labor ratio.
C)a downward shift in the saving-per-worker curve and a decrease in the capital-labor ratio.
D)a leftward movement along the saving-per-worker curve and a decrease in the capital-labor ratio.

Question

Quizplus · Accepted Answer

In the long run, the economy tends to return to its steady-state capital-labor ratio, as investment and savings adjust to replace the destroyed capital.

An Earthquake Destroys a Good Portion of the Capital Stock