Suppose country A receives millions of immigrants from country B. 

a) In the short run (with sticky wages), by using the appropriate graph explain the effect of this immigration on country A's equilibrium output and price level. 

b) In the short run (with sticky wages), government increases its expenditure to eliminate the possible effects of the immigration. By using the appropriate graph explain the effect of immigration and change in government expenditure on country A's equilibrium output and price level (compared to the initial situation before immigration) 

c)  In the long run with completely flexible wages, what will be the effect of increased government expenditure on country A's equilibrium output and price level. 

d)  In the short run (with sticky wages), if immigration and increase in government expenditure take place at the same time, do you think there will be a well-defined relationship between equilibrium output and price level?

Answer rating: 100% (QA)

a Figure1 in the document attached below initially illustrates the impact of increased immigration in country As goods market The initial fullemployment equilibrium real outputincome or GDP and the pr... View the full answer