Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 50 units of food and 30 machines. This year, it is producing 55 units of food and 33 machines. Which of the following would NOT explain the increase in output?

Question

Quizplus · Accepted Answer

The increase in output cannot be explained by a reduction in unemployment alone as it does not necessarily increase the economy's production capacity. The other options (B, C, and D) all contribute to an increase in the economy's production capacity, and therefore could explain the increase in output.

Suppose an Economy Produces Two Goods, Food and Machines