Question

Suppose you are a special advisor to Manitoba Government. Premier Brian Pallister would like you to conduct a long-run economic analysis of the COVID-19 pandemic.

There is currently a debate about the effect of the pandemic on the number of immigrants to Manitoba and the growth rate of the labor force in the province: some people think the labor force growth rate will decrease due to the pandemic as the number of immigrants will fall, while others think the number of immigrants will increase (maybe because other countries are handling the pandemic poorly) and the labor force growth rate will increase. Your job is not to take a side, but rather to document the effects on output per capita for each side of the debate.

Explain the effects of a permanent increase or decrease in labor force growth rate on the long-run steady state of the economy. You may use a graph or a few sentences to explain your conclusion. (1.5 points)

Answer 1

There will not be a lot of change in the immigrants because if people leave Manitoba to go back to their regions, people of Manitoba living in other areas will also come back to Manitoba. However, if there is labour force growth, it will lead to an increase in the long run growth in the economy.

The largest component of GDP is consumer spending. An increase in the number of immigrants will lead to an increase in the consumer spending. The increase in consumer spending will drive up production which will increase employment rates thereby leading to long run growth.