Evaluate the effects of large demolition of capital in a Solow economy in Country A that was caused by a natural disaster. Assume the economy began in a steady-state and a shock destroys half of the capital stock. Thankfully, nobody was killed by this natural disaster, so population is unaffected.

1. Draw the evolution of capital per worker, the growth rate of output per worker, investment per worker and (the log of) aggregate output (make sure to include some periods before the shock, the moment of the shock, and some periods after the shock).
2. Use the phase diagram to illustrate the adjustment of the economy after the shock. Discuss the forces at work along the transition.
3. In the 1950s the Japanese economy grew at a very high rate in per capita terms, 7% per year. Is this consistent with analysis in the previous section? Explain your answer.