An economy's production possibilities are most likely to expand if

Question

Quizplus · Accepted Answer

Gross investment refers to the total amount invested in an economy's capital stock, while depreciation refers to the wear and tear on existing capital stock. If the economy's gross investment is greater than depreciation, then the economy is adding new capital stock and expanding its production possibilities. Therefore, the correct answer is C. Choices A and D both relate to a decrease in the economy's capital stock, which would lead to a decrease in production possibilities, while choice B suggests no change in the economy's capital stock and hence no expansion in production possibilities.

An Economy's Production Possibilities Are Most Likely to Expand If