How can an increase in economic growth be represented on a Production Possibilities Frontier (PPF)?

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BlackTom AI · Accepted Answer

Question restated: How can an increase in economic growth be represented on a Production Possibilities Frontier (PPF)?

Option 1: 'A shift inward of the frontier' would indicate a reduction in an economy's productive capacity, perhaps due to disasters, loss of resources, or depreciation. This is the opposite of economic growth, so it misrepresents growth.

Option 2: 'Moving from a point inside the PPF to a point outside the PPF' is not feasible in a single time period because the PPF reflects the maximum feasible production given resources and technology. A move to a point outside the frontier would require an increase in capacity that is not yet realized, effectively the same issue as a shift outward but described as an impossible immediate move.

Option 3: 'Moving from a point outside the PPF to a point inside the PPF' suggests a deterioration in technology or resources, or inefficient reallocation so that previously unattainable production becomes feasible at a lower level. This would not represent growth; it indicates a decline or waste, not an expansion.

Option 4: 'A shift outward of the frontier' captures the essence of economic growth: an outward shift means the economy can produce more of both goods due to increased resources, better technology, or improved productivity, expanding the production possibilities.

Summary of reasoning: Options 1, 2, and 3 describe scenarios that do not reflect growth in an economy’s productive capacity. Only an outward shift of the frontier denotes that the maximum feasible production combinations have increased, which is the standard graphical representation of economic growth on the PPF.

ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser

How can an increase in economic growth be represented on a Production Possibilities Frontier (PPF)?

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