Question

The following graph shows the production possibilities curve (PPC) of an economy that produces food and computers. Suppose that the government eliminates restrictions on foreign private investment. This encourages a large number of multinational corporations to invest in this economy, which increases the amount of capital in the economy 0 0 Adjust the PPC to show the economy's new production possibilities after the increase in capital. 32 PPC 24 O 16 PPC 10 15 20 QUANTITY OF COMPUTERS (Millions of computers) Consider the direction in which you shifted the PPC on the graph. This type of shift of the PPC generally means that GDP the population in this economy does not change. In such a case, GDP per capita of this economy 2 .Assume that This means the economy experiences economic growth

first, move the graph

increases/decreases

increases/decreases

negative/positive/zero

Answer 1

The PPC curve shows the combination of two goods which an economy can produce with its given level of resources. An increase in the capital would increase the production capacity which will shift the PPC out. The shift in the PPC is shown below:

0h 24 O 16 10 15 20 QUANTITY OF COMPUTERS (Millions of computers)

Blank 1: Increases

Blank 2: Increases

Blank 3: Positive

Explanation: When PPC increases, the economy can produce more and GDP increases. Per capita GDP = GDP/population. So, when GDP increases and the population remains unchanged, per capita GDP increases. GDP increases when there is positive economic growth.