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April 20, 2019, 10:14:55 am

Author Topic: Effect of increased Labour Force Participation Rate on key Economic Variables  (Read 56 times)  Share 

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Seamus Wong

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Hello,

Could anyone else answer the following question so that I can see how others approach these sorts of questions?
Here is the question:
B) Explain how an increase in the labour force participation rate would likely affect economic activity and other domestic macroeconomic economic variables:

Here's my answer for comparison with all of your answers. Let me know if I'm missing anything important or if the structure could be improved.

This increase in the number of individuals who are either actively seeking employment or currently in paid job would result in a greater quantity of labour resources available for firms to utilise in production. This therefore increases the productive capacity of a nation and their ability to expand operations. The expansion of operations thus results in rising levels of production, increasing GDP. The rise in production would increase the demand from firms for resources, including labour, which in-turn reduces the level of cyclical unemployment. Due to the more favourable AS-side condition, firms are capable of supplying a greater quantity of goods and services at given prices, thus reducing cost-inflation, boosting both material and non-material living standards.


Thanks
« Last Edit: April 16, 2019, 12:35:53 pm by Seamus Wong »

Chelsea f.c.

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So the increase in the participation rate may lead to more competition in jobs market decreasing wages and inflation thus shifting supply curve to the right (higher output for each given level of inflation) leading to higher output.
Bachelor of Commerce (Honours) Finance - UoM - 2019
Bachelor of Commerce - Economics and Finance - UoM - 2015 - 2018
Diploma in Mathematical Sciences - Statistics and Stochastic Processes - UoM - 2015 - 2018