Compare two economies A and B that start out with identical production possibilities curves. Economy A chooses an efficient point with six consumption goods and three capital goods, while economy B chooses an efficient point with four consumption goods and five capital goods. In the future we can predict:

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Economy B, by choosing a point with more capital goods, is investing more in the production capabilities that will enhance future growth, leading to faster growth compared to Economy A, which chose more consumption goods and fewer capital goods.

Compare Two Economies a and B That Start Out with Identical