explain how the GDP of a country depends on the population of the country
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explain how the GDP of a country depends on the population of the country
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Answer:
Is GDP affected by population growth or population growth rate? Why?
There is a clear positive link :
When the populaties grows, labour increases. Equilibrium labour will also be higher.
Given the production function:
Y = (AL)^alpha.K^(1-alpha)
We see that an increase in L (=labour) will lead to an increase of Y (=GDP).
For a more intuitive reasoning:
If there are more people to produce stuff, we will produce more stuff simply because we have more workers.
Note:
This does not mean we will get better on an individual basis. It just means that larger countries will produce more purely based on their population. As an example:
GDP of India is about 5,2 times the GDP of Belgium. But population of India is about 118 times the population of Belgium (2017).
So if your population grows, your GDP will grow but it will not signify an improvement of living.
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