Using Figure 1.5, if an economy is currently producing on PP2, which of the following would shift the production possibilities curve toward PP1?
A) An increase in the quantity of labor available.
B) A decrease in the amount of capital available.
C) An increase in the level of unemployment above the normal level.
D) An advancement in technology.

Question

Using Figure 1.5, if an economy is currently producing on PP2, which of the following would shift the production possibilities curve toward PP1?
A) An increase in the quantity of labor available. 
B) A decrease in the amount of capital available. 
C) An increase in the level of unemployment above the normal level. 
D) An advancement in technology.

Quizplus · Accepted Answer

If the economy is currently producing on PP2, it means it is utilizing all available resources of labor and capital. Therefore, a decrease in the amount of capital available (option B) would cause a shift in the production possibilities curve towards PP1, which represents the production of more consumer goods and fewer capital goods. An increase in the quantity of labor available (option A) would also shift the curve outward, but it would not necessarily shift it towards PP1. Option C, an increase in unemployment, would shift the curve inward since fewer resources are available for production. Option D, an advancement in technology, would shift the curve outward, but it may cause a shift towards PP2, representing the production of more capital goods and fewer consumer goods.