Figure 14-1
-Refer to Figure 14-1. Suppose the economy is operating on curve B and there is positive depreciation to its existing capital stock. The decision to produce at point r is likely to
I. shift the production possibilities curve slowly toward curve C.
II. shift the production possibilities curve slowly toward curve A.
III. reduce the economy's capital stock.
IV. result in a negative net private investment.

Question

Figure 14-1 
-Refer to Figure 14-1. Suppose the economy is operating on curve B and there is positive depreciation to its existing capital stock. The decision to produce at point r is likely to 
I. shift the production possibilities curve slowly toward curve C.
II. shift the production possibilities curve slowly toward curve A.
III. reduce the economy's capital stock.
IV. result in a negative net private investment.

Quizplus · Accepted Answer

If the economy is operating on curve B and there is positive depreciation, producing at point r (likely a point with high consumption and low investment) will reduce the capital stock over time. This will shift the production possibilities curve toward curve A (a lower curve), reduce the economy's capital stock, and result in negative net private investment.

Figure 14-1 -Refer to Figure 14-1. Suppose the Economy Is Operating on Is