Figure 5.1. The figure shows a linear production possibility curve representing a tradeoff faced by a country, between necessities and luxuries.
-Refer to figure 5.1. A fall in the gross domestic product of the country will lead to:
A)a leftward shift in the production possibility curve.
B)a rightward shift in the production possibility curve.
C)an increase in the consumption of luxury goods.
D)an upward movement along the production possibility curve.
E)no change in the consumption pattern of the country.

Question

Figure 5.1. The figure shows a linear production possibility curve representing a tradeoff faced by a country, between necessities and luxuries​. 
-Refer to figure 5.1. A fall in the gross domestic product of the country will lead to:​
A)​a leftward shift in the production possibility curve. 
B)​a rightward shift in the production possibility curve. 
C)​an increase in the consumption of luxury goods. 
D)​an upward movement along the production possibility curve. 
E)​no change in the consumption pattern of the country.

Quizplus · Accepted Answer

A fall in the gross domestic product of the country means that there is a decrease in the resources available for production. As a result, the country will have to produce fewer goods and services, and the production possibility curve will shift leftward. This means that the country will have to give up more of one good to produce the same amount of the other good. Therefore, there will be a decrease in the consumption of both necessities and luxuries as the country will have less output of both goods.

Figure 51 the Figure Shows a Linear Production Possibility Curve Representing