Use the following to answer questions .
Exhibit: Investment and Production Possibilities
-(Exhibit: Investment and Production Possibilities) 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

Use the following to answer questions .
Exhibit: Investment and Production Possibilities 
-(Exhibit: Investment and Production Possibilities) 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

Producing at point r, with positive depreciation, means the economy is not investing enough to replace depreciated capital, leading to a reduction in capital stock, shifting the curve toward A, and resulting in negative net private investment.

Use the Following to Answer Questions