In an Economy with Flexible Prices, Competitive Factor Markets, and Fixed

Essay

In an economy with flexible prices, competitive factor markets, and fixed supplies of the factors of production, graphically illustrate the impact of a change in immigration policy in a country that permits a huge influx of foreign workers into the labour market, ceteris paribus. Be sure to label the axes, the curves, the initial equilibrium values, the direction the curve's shift, and the terminal equilibrium values. Explain in words how the equilibrium values of labour, the real wage, saving, investment, and the real interest rate change.