Question

In August 2019, Hurricane Dorian wreaked havoc throughout the Caribbean. Dorian was the most powerful tropical hurricane on record to strike the Bahamas, and is regarded as the worst natural disaster in the country's history. Estimates suggest the total damage could cost almost $3 billion dollars. Use the one- period closed-economy macro model to understand the economic effects of this loss in capital. In other words, imagine a decrease in K. For each of the following questions, state how each variable would change, if at all, and provide a brief discussion explaining your answer: (a) Output (b) Marginal product of labour (c) Real wage (d) Consumption (e) Leisure

Answer 1