An increase in the unemployment rate will shift the production possibilities frontier to the right.

Question

Quizplus · Accepted Answer

The unemployment rate has no direct effect on the production possibilities frontier, which represents the maximum output possibilities of an economy given its resources and technology. It is determined by factors such as resources, technology, and efficiency. An increase in unemployment could lead to a decrease in available resources and a decrease in production possibilities, shifting the PPF to the left.

An Increase in the Unemployment Rate Will Shift the Production