Suppose a hurricane destroys 20% of the capital stock in a country.In the long run,output will ________ and the price level will ________.
A) decrease; decrease
B) decrease; increase
C) decrease; remain unchanged
D) remain unchanged; remain unchanged
E) remain unchanged; increase

Question

Quizplus · Accepted Answer

In the long run, the destruction of capital stock reduces the productive capacity of the economy, leading to a decrease in output. The reduced supply of goods and services can lead to an increase in the price level due to scarcity.

Suppose a Hurricane Destroys 20% of the Capital Stock in a Country.In