What is the effect of population growth on GDP?

1 Answer
Nov 6, 2016

Answer:

There is no definite answer, but it may cause an increase in GDP due to an increase in the labour force.

Explanation:

In economics, labour is a factor of production and with an increase in the labour force, due to population growth, the total output may increase causing the GDP to increase. The wages for labour may also decrease due to an abundance of labour, this would allow the cost of production to decrease. Thus the producer may choose to employ more people and increase production.

However, the increase in GDP would be a long run effect as people are not considered part of the labour force until the age of approximately 15. The economy may not have enough available jobs for the population, which would cause the unemployment rate to increase. Meaning an increase in population does not always result in growth in GDP.