Question

Graph will move upward or downward ???

The United States and the European Union have imposed sanctions against Iran for violating international laws regarding the enrichment of uranium. Suppose that in response, political reform takes place in Iran that results in the cessation of uranium enrichment, increased protection of private property rights, and more political stability. Use the graph to illustrate the impact these reforms would have on this hypothetical Iranian aggregate production function K (capital)

Answer 1

The production function will shift upward.

Since political reforms will lead to revokation of the sanctions imposed on Iran, leading to political stability & increased demand for production, thus production will increase at the same given capital level.

MCQ:

Option b)

Since resources are same, so production will increase due to improvement in political & social institutions.

& No exogenous production factor or resources has changed, so this will be an endogenous growth