Question: Suppose a plague causes a one-time reduction in an economy's labor force; immediately afterward the economy returns to its pre-plague labor-force growth rate. Suppose further that the economy was on its balanced-growth path before the plague, the saving rate never changes, and there is never technological progress.
What is the plague's immediate impact on total output and output per worker?
Is the growth rate of output after the plague and before the economy achieves balanced growth smaller or greater than its balanced-growth-path rate?