Answer to Question #144571 in Macroeconomics for Sharmin

Question

Consider an economy with technological progress but
without population growth that is in steady-state. Now suppose there is a one-time
jump in the number of workers.
(a) At the time of the jump, does output per unit of effective labor rise, fall or stay
constant.
(b) After the initial change (if any) in output per unit of effective labor when the new
workers appear, is there any further change in output per unit of effective labor? If
so, does it rise or fall? Why?
(c) Once the economy reaches its new steady-state, is output per unit of effective labor
higher, lower or the same as it was before the new workers appeared? Why?

Answer 1

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