Question

In many developed countries birth rates are below replacement level. (the number of people who die are greater than the number of people who born. Suppose that last year a horrible disease makes residents of Canada unable to have children, so the birth rate suddenly and unexpectedly falls to zero. Also suppose as a result of disease, no one is allowed to enter or leave Canada (no immigration). Instead, those existing Canadians go about their lives, aging, retiring, and eventually dying until there is no one left in Canada.

You are an economist employed by the government and they have asked you to prepare a report on the future of the Canadian economy. Using the knowledge, you learned in the course, summarize in a short paragraph the macroeconomic consequences of lower birth rates. You should only use our class terminology. Try to keep your answer to 4 or 5 sentences.

Answer 1

Long term impact of low birth rates is not positive as it gives rise in the number of elderly and the population is faced with the challenge of aging. Consumer choices also change as the market shifts its preference towards goods and services for the elderly hence firms and Industries supplying baby and children goods and services are faced with a challenge. Also, there is a fall in consumption due to the fall in population hence impacting the supply chain. Reduction in the working-age population is the biggest danger as this set of the population is mostly involved in labor, productive services for the growth and development of the economy . As the working population and overall population reduces, the amount of taxes collected too reduces impacting revenue of the government hence inducing the government into debt.