Consider a country that has no population growth and where there is no technological development. The capital stock is on the steady state level. Then there is a large earthquake which destroys 15% of the capital stock and kills 5% of the population.

(a) Illustrate what happens in a diagram (with the capital stock on the horizontal axis, and the real rate of return on the vertical axis). What is the long-run effect on the capital stock and production?

b)Draw diagrams with time on the horizontal axis to illustrate what happens over time with the capital stock, investment, the real interest rate, and production.

Please may you also explains clearly the reasoning behind it, thanks a lot!