On January 12th 2010 a devastating earthquake with a magnitude of 7.3 struck Haiti. As a result, about 40% of the capital stock of Haiti was…

On January 12th 2010 a devastating earthquake with a magnitude of 7.3 struck Haiti. As a result, about 40%

of the capital stock of Haiti was destroyed. Assume the economy was at its steady state before the earthquake

hit. Use the Solow Diagram to illustrate how the economy was impacted . Draw a graph showing how output

evolves over time and explain what happens to the level and growth rate of per capita GDP.

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