The effect of an increase in population growth, all else remaining the same, is
i. an increase in the full-employment quantity of labour.
ii. an increase in potential GDP.
iii. a decrease in the equilibrium real wage.

Question

Quizplus · Accepted Answer

An increase in population growth leads to an increase in the full-employment quantity of labor because more people are available to work. This, in turn, increases potential GDP as the economy's capacity to produce goods and services expands with more labor. Additionally, the increase in labor supply can lead to a decrease in the equilibrium real wage, as the higher supply of labor may outpace demand, putting downward pressure on wages.

The Effect of an Increase in Population Growth, All Else