Refer to Figure 17.3.Assume X units of plants and equipment wear out each year.What will happen to the PPC in the future if the economy currently produces at a point near V?

Question

Quizplus · Accepted Answer

If X units of plants and equipment wear out each year, the production capacity of the economy will decline, and the PPC will shift inward over time. However, the question asks about the future if the economy currently produces at a point near V. Assuming that the economy is operating at full capacity at point V, the wear and tear on the capital stock each year will create a need for new investment to maintain the current level of output. If this investment occurs, the economy's production capacity will expand, and the PPC will shift outward. Therefore, the best answer is B.