Answer to Question #190981 in Macroeconomics for Ritika

Question

In the basic solo model without exogenous growth, if labour supply doubles then what happens to output per worker??

Answer 1

The Solow Growth Model is an exogenous model of economic growth. Its used to analyzes changes in the level of output in an economy over time as a result of changes in the population growth rate, the savings rate, and the rate of technological progress.

In supply and output,the ratio of labour supplied is equal to the output per worker. Therefore when the labour supply is doubled, the output per worker will also double. For example, if we double the level of capital stock and double the level of labor, we exactly double the level of output.