Determine the effects on aggregate output

Reference no: EM132131399

Question: Suppose that there is a natural disaster that destroys part of the nation's capital stock.

A) Determine the effects on aggregate output, consumption, employment, and the real wage, with reference to income and substitution effects, and explain your results.

B) do you think the changes in the capital stock are a likely cause of business cycles? Explain with reference to part A and key business cycle facts.

Reference no: EM132131399

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