Answer to Question #169623 in Macroeconomics for Rija

Question

Analyse, using a production possibility curve diagram, the effect net immigration would most likely have on an economy.

Answer 1

The production possibility curve illustrates the trade-off facing the economy. The net immigration rate is the difference between several people moving in and out of an area. Immigration affects labor, purchasing of goods and services, and tax payments. When more people are moving into a country, it is considered to be positive net immigration. People provide labor for the production of goods and services, consumption and revenue increase when the population is high.

The possibility production curve shifts when there is a change in the number of available factors of production. The high number of people is moving into the country causes the production possibility curve to shift right or outward. This is because the high population will increase resources like labor and government revenue that comes from paid taxes. Consumption also increases due to the increased market. Therefore the production of goods and services in the country increase leading to positive economic growth. When fewer people are entering the country, the production possibility curve shifts to the left or inward. This is because there will be less labor, market, and revenue.