Question

Twice as many trained workers are permitted to immigrate to the United States as in the past. Explain the impact on economic growth.

Answer 1

Answer: This will lead to economic growth.

Explanation: First of all, from the question above, we can conclude that workers are trained already. Therefore the country will not need to pay for the education of these skilled workers.

Hence, there will be an increase in the level of human capital of the country at little or no cost.

According to Paul Romer, the new growth theory, knowledge and human capital are endogenous variables which together will positively stimulate the growth of GDP of a country.

Also, we must not forget that skilled workers will on average, take good care of their families. In addition, they are good educational practitioners and supporters and this will, in the long and short run, definitely stimulate the growth of the economy.

Answer 2

Answer: There will be an increase in economic growth as more output will be supplied at lower prices.

Explanation:

When twice as many workers are allowed to move to the United States, this will lead to a surplus in the labor market. The surplus in the labor market will lead to the reduction in wages as the workers will compete with one another.

The competition will lead to decrease in wage rates and the business costs decrease as well. This will in turn, lead to the reduction in the price level and an increase in the quantity supplied. The rightward shift will cause movement along the aggregate demand curve, as there will be more output to be supplied at a lower price level.