When an economy moves from a point inside its production possibilities curve to a point on the curve,potential GDP has increased.

Question

Quizplus · Accepted Answer

Moving from a point inside the production possibilities curve to a point on the curve means that the economy is simply using its resources more efficiently, but it does not necessarily increase potential GDP. Potential GDP can only increase with an increase in the quantity or quality of productive resources, such as labor, capital and technology.

When an Economy Moves from a Point Inside Its Production