Question: Please try to avoid handwriting (15 points) Consider a onetime change in government policy that immediately and permanently increases the level of the labor force
- Please try to avoid handwriting

(15 points) Consider a onetime change in government policy that immediately and permanently increases the level of the labor force in an economy (e.g., a more generous 2 immigration policy) from Lo to L, at some point in time to. Assuming the economy with technological progress at a rate g starts in its initial steady state, use the Solow model to explain what happens to the economy over time and in the long run. In particular, draw three diagrams: 1) for output per capita and 2) total output with time on the horizontal axis using a ratio scale and 3) the Solow diagram that outlines all of the changes. Assume that the growth rate of population stays constant over time at a rate n (as would be the case, e.g., if immigrants and native population have the same birth and death rates)
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