Assume Zero Population Growth and Zero Technical Change

Multiple Choice

Assume zero population growth and zero technical change. If an outbreak of war destroys a large portion of a country's capital stock but the saving rate and the rate of depreciation are unchanged, the growth model predicts that output will:

A) cease to grow.
B) grow but the new steady state will be at a higher output level than before.
C) grow but the new steady state will be at a lower output level than before.
D) decrease to a new steady state.
E) grow and the new steady state will be at the same output level as before.