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Chapter 2: Q. 2.24 (page 47)

Suppose that in Fig 2-24, the nation with other wise the same background conditions as in Problem 2-23 currently has sufficient resources to produce combinations located along only the innermost production possibilities curve. If the nation produces no additional smartphones this year, will the intermediate-shifted PPC resulting from minimal economic growth or the farthest shifted PPC caused by more significant economic growth be more likely to apply next year?

Short Answer

Expert verified

Yes.

Step by step solution

01

Step1. Given information

Given it is that the nation does not have enough resources and can only produce at the inner, inferior combinations of the PPC curve.

02

Step2. Explanation

The growth of any country is linked to the production of capital goods primarily. If a country is able to produce more, that is because the support of the production of capital goods exist. But, here since the question says there is no production of capital goods, there might not be any expansion of production. So, there is no shift in PPC/PPF. This also means there are no consumption goods being produced. But since we said, there might be no production of capital goods, the chances of production of capital goods might still exist. There hence as a result of this, there might be a shift in the PPC outwards, indicating growth.

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