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22 August, 08:51

In 2011, a major earthquake and tsunami in Japan destroyed significant physical capital, including roads, homes, factories, and bridges. Using your knowledge of the Solow model of economic growth, what would be the effect on the aggregate production function of such a destruction of physical capital in Japan?

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  1. 22 August, 12:06
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    The production function is homogeneous of the first degree

    Explanation:

    The Solow Growth Model can be described as an exogenous model of economic growth that analyzes changes in the level of output in an economy over time as a result of changes in the population.

    In this case, Slow growth model is adopted most times after the economy has been affected due to various occurrence of disaster, such as the natural disasters eg Tsunami, hurricane ...

    In this case, the company will focus on the production of a particular product to boost the economy.
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