Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 91 units of food and 48 machines. This year, it is producing 92 units of food and 53 machines. Which of the following would NOT explain the increase in output?

Question

Quizplus · Accepted Answer

An increase in output can be explained by an increase in inputs (such as labor force or productivity) or an improvement in technology, but unemployment refers to the portion of the labor force that is not currently employed. Therefore, a reduction in unemployment does not necessarily increase output.

Suppose an Economy Produces Two Goods, Food and Machines