If improved expectations about the future lead to a decrease in unemployment ass

Question

If improved expectations about the future lead to a decrease in unemployment associated with both gasoline and heating oil in Country X, then how does this event affect Country X’s PPC?

Movement from a point inside this PPC to a point that's on the PPC

Movement from a point that's on this PPC to a point inside the PPC

Movement between 2 points, up along the PPC (i.e. toward gasoline)

Movement between 2 points, down along the PPC (i.e. toward heating oil)

Increase (shift outward) in the PPC that affects both goods

Decrease (shift inward) in the PPC that affects both goods

Increase (pivot outward) in the PPC that affects only gasoline

Increase (pivot outward) in the PPC that affects only heating oil

Decrease (pivot inward) in the PPC that affects only gasoline

Decrease (pivot inward) in the PPC that affects only heating oil

A.

Movement from a point inside this PPC to a point that's on the PPC

B.

Movement from a point that's on this PPC to a point inside the PPC

C.

Movement between 2 points, up along the PPC (i.e. toward gasoline)

D.

Movement between 2 points, down along the PPC (i.e. toward heating oil)

E.

Increase (shift outward) in the PPC that affects both goods

F.

Decrease (shift inward) in the PPC that affects both goods

G.

Increase (pivot outward) in the PPC that affects only gasoline

H.

Increase (pivot outward) in the PPC that affects only heating oil

I.

Decrease (pivot inward) in the PPC that affects only gasoline

J.

Decrease (pivot inward) in the PPC that affects only heating oil

Explanation / Answer

Decrease in unemployment in goods mentioned in the question will affect Production possibility curve as following:

Explanation:

If there is an initial high rate of unemployment for both the goods then economy will be operating below / under the production possibility curve. Further increase in employment for both the goods will push the production on PPC curve. Thus, production will increase.

E. Increase (shift outward) in the PPC that affects both goods

Explanation:

If economy is already at PPC curve then, further increase in employment can increase the production level of both the goods. Thus, a new PPC with a new set of combination of both the product will be developed. Here, economy must be backed by the increased demand and or change in technology.

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