An increase in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point inside the frontier.

Question

Quizplus · Accepted Answer

This is true because an increase in the unemployment rate means that the economy is not utilizing all of its resources, resulting in a decrease in output. This can be represented graphically as a movement from a point on the production possibilities frontier (which represents full employment and full resource utilization) to a point inside the frontier (which represents unemployment and underutilization of resources).

An Increase in the Unemployment Rate May Be Represented as a Movement