Question

Determine how each of the following would affect the U.S. Production Possibilities Frontier (PPF). Scenario Shift Outward Shift Inward Movement to a Point Closer to the Frontier Movement to a Point Inside the Frontier A war that takes place on U.S. soil An increase in the number of illegal immigrants A decrease in the unemployment rate A law that requires individuals to enter lines of work for which they are not suited The discovery of a new oil field Save & Continue Continue without saving

Answer 1

A war that takes place on US soil will lead to a shift inward of the US production possibility frontier. This is because there would either be destruction or use of plant and machinery on war and people would be killed. Both of them would lead to a reduction in production.

An increase in the number of illegal immigrants would lead to an outward shift of US production possibility curve. Increase in inward immigrants would lead to more cheap labor available and hence the production would increase.

A decrease in the unemployment rate would not actually change the Production possibility curve since the actual production in the country would be below the curve when the unemployment rate is high. A reduction in the unemployment rate would lead to an expansion to the actual production level on the production possibility curve so that resources are efficiently used.

A law that requires individuals to enter lines of work for which they are not suited will lead to a movement inside the frontier. This would happen since there would be under-utilization and mismanagement of the workers skills which would lead to a decrease in production.

The discovery of a new oil field would lead to an outward shift of the production possibility curve since the amount of available resources have increased.