please solve this question There has a recent debate on whet

please solve this question.

There has a recent debate on whether or not countries such as Canada should accept refugees from warravaged countries. What is the effect of immigration on Canada’s GDP? Demonstrate the effects using the production function.

Solution

If Canada accepts refugees from warravaged countries, there would be increase in population with more aggregate demand compared to the supply. Due to increased demand for goods and services, there would be shortage of goods and hence prices would rise leading to hyperinflation. There would be more consumption and less saving as a result of which interest rate would fall. The labor would rise and hence there would be unemployment increase. Hence this immigration would lead to inflation and govt expenditure would be required to increase overseas investment. Hence, the market would collapse and US economy would have a deficit The GDP would fall. There would be recession and lower exports and more imports leading to devaluation of currency.

By,

Nishant Bhatt