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Level III
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Capital Market Expectations
Capital Market Expectations
Medium
A Category 5 hurricane destroys a significant portion of a country's manufacturing capacity. Which statement best describes the likely effect on the country's economic growth trajectory?
A
Short-run growth declines due to destroyed capacity, but long-run growth may be enhanced if reconstruction replaces old equipment with more efficient technology
B
Short-run and long-run growth both decline permanently because destroyed capital cannot be recovered
C
Short-run growth increases due to reconstruction activity, with no long-run effect
D
Growth is unaffected because insurance payouts fully offset the destruction
Select an answer to continue
Tags
#natural-disasters
#reconstruction
#creative-destruction
#trend-growth
#exogenous-shocks
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