China's State Council has encouraged more spending to "improve transportation links and other infrastructure...." It will also "step up its spending on vocational training and other educational programs for adults."
www.nytimes.com, Keith Bradsher, October 19, 2008
Suppose that capital goods are on the vertical axis while consumption goods are on the horizontal axis of China's PPF. As a result of enacting the policies, we would expect
i.an expansion of China's production possibilities.
iI.capital accumulation.
iII.an increase in human capital.
A) i and II only.
B) i, II and III.
C) i and III only.
D) II and III only.

Question

Quizplus · Accepted Answer

The policy of improving transportation links and other infrastructure would lead to an increase in capital goods, resulting in capital accumulation, which is represented by a movement along the vertical axis of the PPF. Similarly, the policy of stepping up spending on vocational training and other educational programs for adults would lead to an increase in human capital, represented by an outward shift of the PPF, which would expand production possibilities. Therefore, both iI and III are correct, and the answer is B.

China's State Council Has Encouraged More Spending to "Improve Transportation