The extent to which roundabout methods of production are used at one moment in time is limited by the extent to which people have abstained from consumption in the past.

Question

Quizplus · Accepted Answer

Roundabout methods of production involve investing in capital goods that will, in turn, increase productivity and output in the future. This requires people to save and abstain from immediate consumption in order to invest in these capital goods. Therefore, the extent to which roundabout methods of production can be used at a given moment is limited by the amount of savings and abstention from consumption in the past.

The Extent to Which Roundabout Methods of Production Are Used