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Consider a Solow economy with a positive rate of technology growth and a positive rate of population growth given. Suppose the economy is already in
Consider a Solow economy with a positive rate of technology growth and a positive rate of population growth given. Suppose the economy is already in a steady state but then a strong earthquake destroys half of its capital stock. Use relevant diagrams to explain how the economy behaves over time. Specifically, the graphs should show how output per capita evolves over time. Meanwhile, explain in words what happens to the level and the growth rate of output per capita.
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