iPad 11:59 AM 33% Courses aplia com 5. Economic growth and PPFs The blue (inner)

Question

iPad 11:59 AM 33% Courses aplia com 5. Economic growth and PPFs The blue (inner) curve on the following graph shows the current production possibilities frontier (PPF) for the economy of Wilshire, and the green outer) curve shows the PPF for Wilshire next year if the economy were to operate at point B today. That is investment choices today impact the growth of the economy, and thus the PPF for next year. PPF Next Year PPF oday CAPITAL GOODS Suppose that this year, the economy is operating at point B, but then a hurricane destroys more capital than is being produced during the year. On the following graph, the PPF that best describes the Wilshire economy next year is Note: The blue and green PPFs are the same as on the previous graph.) PPF Next Year PPF Today PPF PPF PPF Session 59:33 Timeout CAPITAL GOODS

Explanation / Answer

orange, because of the hurricane the overall production possibility dips.

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