Determine the effect on aggregate output-consumption

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Reference no: EM131007220

Suppose that there is a natural disaster that destroys part of the nations capital stock.

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

(b) Do you think that changes in the capital stock are a likely cause of business cycles? Explain by referencing your results in part a and the key business cycle facts

Reference no: EM131007220

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