Problem
Consider a onetime change in government policy that immediately and permanently increases the level of the labor force in an economy from L9 to L1 > L0 at some point in time to. Assuming the economy with technological progress at a rate 9 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 two diagrams: (i) for real wages with time on the horizontal axis using a. ratio scale; and (ii) the Solow diagram that outlines the changes. Assume that, the growth rate of population stays constant over time at a rate R.