Suppose an economy produces two goods: clothes and cars. This economy always operates on its production possibilities frontier. Last year, it produced 450 units of clothes and 25 cars. This year, it is producing 500 units of clothes and 30 cars. Which of the following would NOT explain the increase in output?

Question

Quizplus · Accepted Answer

Unemployment does not directly affect the production possibilities frontier or the efficiency of production. Therefore, a reduction in unemployment would not directly explain the increase in output. The other options, an increase in the labour force, an improvement in technology, and an increase in worker productivity, would all contribute to an increase in output.

Suppose an Economy Produces Two Goods: Clothes and Cars