Use the diagram below to answer the questions.(a) If the economy's production possibilities curve is shown by curve AB, then draw in a new curve, which indicates positive economic growth.(b) If the economy illustrated by production possibilities curve AB is producing at point 4, what economic problem does this represent for this economy?
(c) What are some of the factors, which could cause a shift from AB to EF?

Question

Quizplus · Accepted Answer

The Answer is (a) Any production possibilities curve outside AB indicates growth (such as curve CD).
(b) Production at point 4 indicates that the economy is not operating at its full potential.Increases in aggregate demand or reallocation of resources may be necessary to address this unemployment problem.
(c) A shifting from AB to EF indicates economic growth.This can occur as a result of supply factors that include increased quantity and quality of natural and human resources, increase in the stock of capital, and improved technology; growth in aggregate demand which motivates increases in production; and more efficient allocation of resources.

Use the Diagram Below to Answer the Questions