The only way that an economy can increase its rate of consumption in the long run is by increasing the amount that it produces.

Question

Quizplus · Accepted Answer

This statement reflects the basic economic principle of the production possibility frontier (PPF). The PPF shows the maximum combination of goods and services that an economy can produce given its resource base and technology. Any point inside the PPF represents an inefficient use of resources, while any point outside the PPF is unattainable with the existing resources and technology. To increase the rate of consumption in the long run, an economy has to shift its PPF outward, which can be achieved by investing in capital, improving technology, increasing labor force, or enhancing productivity. By producing more goods and services, an economy can sustain a higher level of consumption over time.

The Only Way That an Economy Can Increase Its Rate