3. (8 points) Consider a Solow economy with exponential population growth, n, and technological growth, g, on a balanced growth path (BGP). Then, at some time t0, an earthquake destroys half of its capital stock. (a) (4 points) Use a Solow diagram to explain how the economy behaves over time, and explain what happens to the level and growth rate of output per worker from time t0 and onwards. (b) (4 points) Using a ratio scale, draw a graph showing how output per worker evolves over time. (You should show the path of output per worker before and after time t0.)

3. (8 points) Consider a Solow economy with exponential population growth, 72., and technological growth, 9, on a balanced growth path (BGP). Then, at some time to, an earthquake destroys half of its capital stock. (a) (4 points) Use a Solow diagram to explain how the economy behaves over time, and explain what happens to the level and growth rate of output per worker from time to and onwards. (b) (4 points) Using a ratio scale, draw a graph showing how output per worker evolves over time. (You should show the path of output per worker before and after time to.)