Suppose an economy produces two goods: winter coats and skis. This economy always operates on its production possibilities frontier. Last year, it produced 750 units of coats and 250 pairs of skis. This year, it is producing 820 units of coats and 275 sets of skis. Which of the following would NOT explain the increase in output?

Question

Quizplus · Accepted Answer

A reduction in unemployment would not explain the increase in output if the economy is always operating on its production possibilities frontier, as this implies full employment.

Suppose an Economy Produces Two Goods: Winter Coats and Skis