A production possibilities frontier can shift outward if
a. government increases the amount of money in the economy.
b. there is a technological improvement.
c. resources are shifted from the production of one good to the production of the other good.
d. the economy abandons inefficient production methods in favor of efficient production methods.
The correct answer and explanation is :
The correct answer is:
b. there is a technological improvement.
Explanation:
The Production Possibilities Frontier (PPF) is a graphical representation of the maximum possible output combinations of two goods that an economy can produce, given its available resources and technology. The PPF is typically concave, illustrating the trade-offs between the production of different goods due to resource constraints.
An outward shift in the PPF indicates economic growth, meaning the economy can produce more of both goods than before. This shift can occur due to several factors, but the most significant one is technological improvement. Technological advancements increase productivity, allowing more goods to be produced with the same amount of resources. For example, the invention of more efficient machinery in agriculture or manufacturing can enable greater output without requiring additional labor or capital.
Option (a) is incorrect because increasing the money supply does not directly impact the economy’s productive capacity; it only affects inflation or demand in the short run.
Option (c) is incorrect because shifting resources from one good to another does not expand the overall production possibilities—it only changes the mix of goods produced, moving along the existing PPF rather than shifting it outward.
Option (d) is incorrect because adopting more efficient production methods moves the economy closer to the PPF (reducing inefficiency) but does not shift the PPF itself outward. The frontier only expands when there is an increase in available resources or better technology.
Thus, technological improvement is the key factor that drives long-term economic growth and pushes the PPF outward, allowing higher levels of production and consumption in an economy.