2 How is an immediate effect of an increase in unemployment illustrated on a production possibility curve diagram?1 pointA a movement of the production point closer to the curveB a movement of the production point further inside the curveC a shift of the production possibility curve inwardsD a shift of the production possibility curve outwards
Question
2 How is an immediate effect of an increase in unemployment illustrated on a production possibility curve diagram?1 pointA a movement of the production point closer to the curveB a movement of the production point further inside the curveC a shift of the production possibility curve inwardsD a shift of the production possibility curve outwards
Solution
An immediate effect of an increase in unemployment is illustrated on a production possibility curve diagram by a movement of the production point further inside the curve.
Here's why:
The production possibility curve (PPC) represents the maximum combination of goods and services that can be produced by an economy with the available resources and technology. It assumes that all resources are fully employed.
When there is an increase in unemployment, it means that not all resources are fully utilized. In other words, the economy is producing less than it could if all resources were fully employed.
This under-utilization of resources is represented on the PPC diagram by a movement of the production point inside the curve. This is because the point inside the curve represents a combination of goods and services that the economy can produce using its available resources more efficiently.
So, the correct answer is B: a movement of the production point further inside the curve.
Similar Questions
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