Question

An economy starts in steady state. A war causes a massive destruction of the capital stock. This shock will cause

A. the economy to converge to a new lower steady state.
B. the economy to enter a period of negative growth.
C. the growth rate of output to rise initially as the economy begins to converge to a new lower steady state.
D. the growth rate of output to rise initially as the economy begins to converge to the old steady state

Answer 1

D. the growth rate of output to rise initially as the economy begins to converge to the old steady state

Step-by-step explanation: