When the population increases with no change in labour productivity, employment _______ and potential GDP _______.

Question

Quizplus · Accepted Answer

When the population increases and there is no change in labor productivity, more people are available to work, leading to an increase in employment. Since potential GDP is determined by the labor force, capital stock, and productivity, an increase in the labor force (with unchanged productivity) would lead to an increase in potential GDP.

When the Population Increases with No Change in Labour Productivity