Site icon Econ Eye

Spain’s Economy Expands as Population Climbs to 49 Million

EconEye Admin

Spain’s economy grew by 3.2% last year, driven in part by a significant increase in population—from 46 million to 49 million, largely due to increased immigration.–economist.com

Answer the following questions to check your understanding of the story.

How has the increase in Spain’s population influenced Spain’s labor market?

The increase in Spain’s population ____________ and the full-employment quantity of labor.

Wrong! - Does a change in the population influence the demand for labor? When does a change in the population increase the quantity of labor supplied or decrease the quantity of labor demanded?

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.

How does the increasing population contribute to Spain’s economic growth?

An increase in Spain's population creates ___________, and potential GDP increases.

Wrong! - Does an increase in population create a movement along the aggregate production function or a shift of the aggregate production function?

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.

If Spain maintains an annual economic growth rate of 3.2%, approximately how long will it take for real GDP to double?

Wrong! - Use the Rule of 70 to find the answer. What does the Rule of 70 tell us about the number of years it takes for real GDP to double?

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)

Exit mobile version