When the population increases with no change in labor productivity, employment ________ and potential GDP ________.

Question

Quizplus · Accepted Answer

When the population increases without a 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 technology, an increase in the labor force (employment) leads to an increase in potential GDP.

When the Population Increases with No Change in Labor Productivity