An increase in the production of capital goods
A) must increase the current production of consumer goods.
B) shifts the production possibilities frontier inward in the future.
C) shifts the production possibilities frontier outward in the future.
D) must decrease the future production of consumer goods.

Question

Quizplus · Accepted Answer

An increase in the production of capital goods means that more resources are being allocated towards the production of capital goods instead of consumer goods. This shift will result in a decrease in current production of consumer goods, but in the future, the increase in capital goods will lead to an increase in productivity and efficiency, enabling more production of both capital and consumer goods. Therefore, the production possibilities frontier will shift outward in the future.

An Increase in the Production of Capital Goods