Question

A decrease in unemployment will:

A) Move the economy toward its PPF from a point inside of it.

B) Move the economy towards its PPF from a point outside of it.

C) Move the economy from one point on the PPF to another point along it.

D) A and B

E) A and C

Answer 1

A decrease in unemployment will:

A) Move the economy toward its PPF from a point inside of it - Yes because decrease in unemployment means resources are better utilized and there is greater productivity and efficiency(production) which moves the production point towards PPF(outwards)

B) Move the economy towards its PPF from a point outside of it - No because the point outside PPF are unattainable production points given current resources and technologies. It is impossible for an economy to produce outside PPF. It may be future target of the economy.

C) Move the economy from one point on the PPF to another point along it -No because different points in PPD represent different combinations of goods that can be produced with a given resource. The change in resource(here labor) would shift PPF rather than points on PPF.

So, A is the correct choice.