A change in population:
Assume a one-time decrease in population, possibly caused by an onset of disease or a sudden out-migration,
a. Use a variant of Figure 8.15 to determine the effects on the labor market. What happens to labor input, L, and the real wage rate, w/P?
b. Use a variant of Figure 8.8 to determine the effects on the market for capital services. What happens to the real rental price, R/P? What happens to the interest rate, i?
c. What happens to output, Y, and consumption, C? What happens to investment, I? What happens over time to the stock of capital, K?