Economic growth causes the PPF to
a. shift rightward.
b. remain constant.
c. shift leftward.
d. go from a straight line to a curve.
The correct answer and explanation is:
The correct answer is a. shift rightward.
Economic growth is represented by an outward shift of the production possibilities frontier (PPF). The PPF shows the maximum combinations of goods and services that an economy can produce, given its resources and technology. When there is economic growth, either through an increase in resources (such as labor, capital, or land) or technological advancements, the economy becomes capable of producing more goods and services. This growth allows the economy to operate beyond its previous production capacity, resulting in a rightward shift of the PPF.
This shift is significant because it implies that the economy can now produce a larger quantity of both goods without sacrificing the production of one for the other. For instance, if an economy was previously limited to producing a certain amount of consumer goods and capital goods, economic growth might allow it to produce more of both, thus expanding the production possibilities.
It is important to note that economic growth is not limited to the shift in the PPF; it also includes improvements in efficiency. For example, technological innovation can make the production of goods more efficient, leading to higher output with the same amount of resources. This is reflected in a rightward shift of the PPF, showing that the economy can achieve higher levels of production.
In contrast, if the economy faces a decline in resources (such as a natural disaster or a decrease in the labor force), the PPF would shift leftward, indicating a reduction in the economy’s capacity. Economic growth essentially means that the economy is expanding its potential, moving beyond the limitations it previously faced.