Labor Force Expansion Drives Short-Run Growth

Steps:

• Identify short-run growth drivers: immediate boosts to labor supply or productivity, per Solow model emphasizing capital and labor inputs.
• Assess options: Focus on changes affecting current workforce size and participation rates.
• Compare impacts: Prioritize direct, quick effects on aggregate output (GDP = f(L, K, Tech)).
• Select best: Choose option increasing effective labor without delays.

Why D is correct:

• Raising retirement age extends working lives, immediately increasing labor force participation and hours worked, directly raising potential output via higher labor input in production function Y = A * K^α * L^(1-α).

Why the others are wrong:

• A: Net migration adds workers but requires time for integration, skills matching, and settlement, delaying short-run gains.
• B: Higher birth rate expands future population but yields no immediate labor increase, as children enter workforce decades later.
• C: Increased death rate shrinks population and labor supply, reducing output and growth outright.

Final answer: D