ECONOMICS

WHEN THE PRODUCTION POSSIBILITY CURVE SHIFTS OUTWARDS, THE ECONOMY EXPERIENCES

  • A. growth ✓
  • B. over-production
  • C. inefficient use of resources
  • D. under-production

 

When the production possibility curve shifts outwards, it indicates that the economy is experiencing growth. This growth signifies an increase in the potential total output of goods and services that an economy can produce. The outward shift of the production possibility curve suggests that the economy has improved its efficiency in resource allocation or has experienced technological advancements, allowing for higher levels of production without sacrificing the production of other goods and services.

A shift outwards in the production possibility curve implies that the economy can now produce more of both goods and services than before, leading to an expansion in its productive capacity. This expansion can result from various factors such as increased investment in capital goods, improvements in technology, a larger workforce, or better utilization of existing resources.

In summary, when the production possibility curve shifts outwards, it signifies economic growth and an increase in the potential output of goods and services that an economy can produce.

In other words, when the production possibility curve shifts outwards, it indicates that the economy is experiencing growth. This outward shift signifies an increase in the productive capacity of the economy, allowing for the production of more goods and services without sacrificing the production of others. Factors such as advancements in technology, increased availability of resources, or improved efficiency in production methods contribute to this expansion of the production possibility frontier (PPF). As a result, the economy can achieve higher levels of output and economic growth.

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