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Output in Winston-Salem is produced using labor, L, and capital, K. Initially there is a fixed amount of capital, K0, and a fixed amount of money. All residents of Hickory only uses this form of money for all their transactions.  A large thunderstorm floods Winston-Salem. The flood destroys 20 percent of all capital but does not injure or kill anyone. What happens to real wages and output, respectively?       Increase, decrease       none of the answers are correct     Decrease, unchanged     Increase, uncertain     Increase, increase

Output in Winston-Salem is produced using labor, L, and capital, K. Initially there is a fixed amount of capital, K0, and a fixed amount of money. All residents of Hickory only uses this form of money for all their transactions.  A large thunderstorm floods Winston-Salem. The flood destroys 20 percent of all capital but does not injure or kill anyone. What happens to real wages and output, respectively?       Increase, decrease       none of the answers are correct     Decrease, unchanged     Increase, uncertain     Increase, increase

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Output in Winston-Salem is produced using labor, L, and capital, K. Initially there is a fixed amount of capital, K0, and a fixed amount of money. All residents of Hickory only uses this form of money for all their transactions. 

A large thunderstorm floods Winston-Salem. The flood destroys 20 percent of all capital but does not injure or kill anyone. What happens to real wages and output, respectively?

 

   

Increase, decrease

 
   

none of the answers are correct
   

Decrease, unchanged
   

Increase, uncertain
   

Increase, increase
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