Assuming an economy is already experiencing full employment, then it must produce more consumer goods and fewer capital goods if it wishes to experience greater rates of economic growth over time.

Question

Quizplus · Accepted Answer

If an economy is already experiencing full employment, it cannot produce more output without increasing its resources or improving technology, which is represented by an outward shift of the production possibilities frontier. However, this shift can only occur if more resources are allocated to the production of capital goods, which enable higher productivity and output in the future, rather than consumer goods, which satisfy immediate needs but do not enhance economic growth over time. Therefore, producing more capital goods and fewer consumer goods is the key to sustained economic growth, rather than the other way around.

Assuming an Economy Is Already Experiencing Full Employment, Then It