Question

T/F/U. Immigration increases both ALS and ALD. Draw a diagram(s) consistent with your answer

T/F/U. Immigration increases both ALS and ALD. Draw a diagram(s) consistent with your answer

Homework Answers

Answer #1

"True"

Immigration increases both the aggregate demand and aggregate supply in the economy. With increased population in the economy, people will demand more and the same increased population will be supplying more labor making it cheaper and increasing the output in the economy.

In the above graph, the economy was initially at the equilibrium point "a", after an increase in the immigration the SRAS shifted to the right SRAS1 at a lower cost and higher demand. Due to increase population, the potential GDP or output will also increase. This will shift the LRAS to the right at incrased output level.

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