Suppose that the production function of the economy is:
Y= AK^0.5L^0.5
Consider the followin...
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Suppose that the production function of the economy is:
Y= AK^0.5L^0.5
Consider the following hypothetical scenario regarding an expansion of the labor supply through immigration. An economy is initially in equilibrium with a capital stock and an initial labor supply L1. Suppose that a wave of immigration increases the size of the labor supply to L2= 4.L1.
Required:
Find the ratio of output after the immigration wave to output before the immigration wave Y2/Y1.
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Answers: 1
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