If a country must decrease current consumption to increase the amount of capital goods it produces today, then it must
A) be using resources inefficiently today, but will be more efficient in the future.
B) be producing along the production possibilities frontier today and its production possibilities frontier will shift outward if it produces more capital goods.
C) must be producing outside the production possibilities frontier and will continue to do so in the future.
D) must not have private ownership of property and will have to follow planning authorities' decisions today and in the future.

Question

Quizplus · Accepted Answer

The correct answer is B because when a country decreases current consumption to increase the production of capital goods, it is reallocating resources from consumer goods to capital goods. This action suggests that the country is operating on its production possibilities frontier (PPF), which represents the maximum possible output combinations of two goods (or categories of goods, such as consumer goods and capital goods) given a fixed amount of resources. By producing more capital goods, the country is investing in future growth, which will shift the PPF outward, indicating an increase in the potential output levels due to the expanded productive capacity.

If a Country Must Decrease Current Consumption to Increase the Amount