Spain’s Economy Expands as Population Climbs to 49 Million

Well Done! - Labor market equilibrium occurs when the quantity of labor demanded equals the quantity of labor supplied. When the labor market is in equilibrium, the economy is at full employment.

Population growth increases the supply of labor and the full-employment quantity of labor.

Good Job! - The aggregate production function is the relationship that tells us how real GDP changes as the quantity of labor changes when all other influences on production function remain the same.

Potential GDP is the quantity of real GDP determined by the aggregate production function at the full-employment quantity of labor.

Population growth increases the quantity of labor. The economy moves up along the aggregate production function. With the increase in the full-employment quantity of labor, potential GDP increases and the economy grows.

That's Right! - The Rule of 70 states that the number of years it takes for the level of any variable to double is approximately 70 divided by the annual percentage growth rate of variable.

If Spain maintains an annual economic growth rate of 3.2%, its real GDP doubles in approximately 22 years. (70 divided by 3.2)