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Question
Macroeconomics
Posted 8 months ago
The graph below represents a change in the production possibilities of the nation of Xam.
Which of the following statements about the economic growth in this PPC are true?
Choose 1 answer:
(A) Xam's resources or technology have not changed
(B) Xam now has more resources or technology available to produce more fast cars, but not fruit smoothies
(c) Xam has fewer resources or technology to produce fruit smoothies and fast cars
(D) Xam now has more resources or technology available that can produce either fast cars or fruit smoothies
(E) Xam now has more resources or technology to produce more fruit smoothies, but not fast cars
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Answer from Sia
Posted 8 months ago
Solution
a
Definition of Production Possibility Curve (PPC): A PPC represents the maximum combination of two goods that a nation can produce given its resources and technology
b
Economic Growth: Economic growth is depicted by an outward shift of the PPC, indicating an increase in the nation's capacity to produce goods and services
c
Analysis of Graph: The graph shows two PPCs, PPC1 and PPC2. PPC2 is further from the origin than PPC1, indicating an outward shift. This shift suggests that the nation of Xam has experienced economic growth
d
Resource and Technology Implications: The outward shift from PPC1 to PPC2 implies that Xam now has more resources or improved technology, allowing it to produce more of both goods (fast cars and fruit smoothies)
Answer
(D) Xam now has more resources or technology available that can produce either fast cars or fruit smoothies
Key Concept
Economic Growth and PPC Shift
Explanation
The outward shift of the PPC from PPC1 to PPC2 indicates that Xam has experienced economic growth, meaning it now has more resources or improved technology to produce more of both goods. This is why option (D) is the correct answer.
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