Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with 6 consumption goods and 3 capital goods, while economy B also chooses an efficient point, but with 4 consumption goods and 5 capital goods. In the future we can predict:

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Economy B chose a point with a higher proportion of capital goods, which means it is investing more in productivity-enhancing equipment and technology. This should lead to faster economic growth in the long run compared to economy A, which has chosen a point with a lower proportion of capital goods.

Compare Two Economies a and B That Start Out with Identical