ECONOMICS
ECONOMIC GROWTH
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an inward shift of the whole PPF.
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an outward shift of the whole PPF.
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a movement to the right along the PPF.
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a movement to the left along the PPF.
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Detailed explanation-1: -An outward shift of a PPF means that an economy has increased its capacity to produce.
Detailed explanation-2: -PPF shifts in the outward direction when the total production in the economy increases. This happens either due to an increase in the number of inputs or resources available or on account of technological advancements. All this leads to more economic growth. So, PPF shifts outward when growth in an economy increases.
Detailed explanation-3: -Over time, a growing economy will tend to shift the PPF outwards. The law of diminishing returns holds that as increments of additional resources are devoted to producing something, the marginal increase in output will become smaller and smaller.
Detailed explanation-4: -As output increased, the PPF curve would be pushed outwards. A new curve, represented in the figure on which Y would fall, would show the new optimal allocation of resources. When the PPF shifts outwards, it implies growth in an economy.
Detailed explanation-5: -A PPF shifts outward when the production of both goods can be increased without reducing/decreasing the production of any good. This can be due to technological change, capital accumulation, or increased population.