Question

Economic growth can be portrayed as:____________. 1. An inward shift of the production possibilities curve. 2. An outward shift of the production possibilities curve. 3. A movement from one point to another point on a fixed production possibilities curve. 4. A movement from a point on to a point inside a production possibilities curve.

Answer 1

Answer:

2. An outward shift of the production possibilities curve.

Explanation:

Economic growth can be defined as an increase in the output of goods produced in an economy or increase in what an economy produces using its scarce resources.

Simply put it is an increase in production capacity.

The production possibility curve shows all possible combinations of two products that can be produced with a given level of resources.

When there is increase in capacity there is increase in number of goods that can be produced. For example if resources of 50 units can produce 15 units of A and 20 units of B. An increase of resources to 70 units will be able to produce more let's say 20 units of A and 23 units of B.

This results in shift of PPP outward as illustrated in the attached diagram.