3. Economic growth The following graph shows the production possibilities curve (PPC) of an economy that produces food and computers. Suppose that a series of natural calamities and climate changes significantly reduce the economy's endowment of natural resources and damages its productivity capacity. Adjust the PPC to show the economy's new production possibilities after the decrease in natural endowment. QUANTITY OF FOOD (Millions of pounds) 24 16 32 0 0 5 PPC 10 15 20 PPC ? QUANTITY OF COMPUTERS (Millions of computers) increases decreases economic growth. Consider the direction in which you shifted the PPC on the graph. This type of shift of the PPC generally means that GDP that the population in this economy does not change. In such a case, GDP per capita of this economy experiences Assume . This means the economy 3. Economic growth The following graph shows the production possibilities curve (PPC) of an economy that produces food and computers. Suppose that a series of natural calamities and climate changes significantly reduce the economy's endowment of natural resources and damages its productivity capacity. Adjust the PPC to show the economy's new production possibilities after the decrease in natural endowment. QUANTITY OF FOOD (Millions of pounds) 32 24 16 0 0 5 PPC 10 15 QUANTITY OF COMPUTERS (Millions of computers) 20 PPC Consider the direction in which you shifted the PPC on the graph. This type of shift of the PPC generally means that GDP that the population in this economy does not change. In such a case, GDP per capita of this economy experiences economic growth. Assume . This means the economy

Complete the following table by indicating whether each point represents output combinations that are inefficient, efficient, attainable, or not attainable. Check all that apply. Inefficient Efficient Attainable Not attainable Point A B E F O O (O

9. Draw a PPF curve for the macroeconomy of Germany (a large producer of capital goods). Assume that Germany has an unemployment rate of 7%. (Hint: draw the dashed line assuming a full employment level of 4.5% unemployment rate and consider only consumption and capital goods in the economy.)

Refer to the accompanying figure. If this economy were currently operating at point D, then in order to make more movies: A Movies (number per year) B D Milk (gallons per year) the first productive resources to switch to making movies should be those with the lowest opportunity cost of making milk. no productive resources would need to switch from making milk to movies because each resource should continue to be used according to its comparative advantage. no productive resources would need to switch from making milk to movies because point D is already efficient. the first productive resources to switch to making movies should be those with the highest opportunity cost of making milk.

6. Shifts in production possibilities Suppose Argentina produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities curve (PPC) for barley, an agricultural good, and airplanes, a capital good. Drag the production possibilities curve (PPC) on the graph to show the effects of a time-saving innovation in the manufacturing of airplanes. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther. AIRPLANES (Thousands) 180 150 120 8 O 60 30 0 0 70 PPC 140 210 280 BARLEY (Millions of bushels) 350 420 PPC

8. Economic growth The following graph shows the production possibilities curve (also known as the production possibilities frontier) of an economy that produces cars and computers. Suppose that a rise in this economy's saving rate allows for investment in modern, efficient manufacturing plants. Adjust the production possibilities curve (PPC) to show the economy's new production possibilities after the rise in the saving rate. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther. QUANTITY OF CARS (Mor) 24 PPC 5 10 QUANTITY OF COMPUTERS (Mor) 15 Suppose society faces a broad tradeoff between allocating resources to the production of investment goods (computers) and consumption goods (cars) before the rise in the saving rate described above. Which of the following events…

1.  Briefly explain what the term "agglomeration economies" refers to and briefly describe what the fundamental reason for the development of this particular type of economy relates to. Provide two examples of factors associated with agglomeration economies and identify what these factors help to explain. Identify two factors that would lead to diseconomies and briefly explain how the future of many of the world's cities will be likely be determined.   2.  Describe the concept of diminishing returns in production.  Explain why diminishing returns occurs.

Suppose that Russia produces 10,000,000 barrels of oil and 1,000 bushels of wheat each week. Suppose that India produces 10657 barrels of oil and 10657 bushels of wheat each week. In autarky, what is the largest amount of wheat Russia can consume every week? amount of wheat per week: What does the term autarky refer to? O a major argument against globalization government policies meant to reduce international trade the process of negotiating terms of trade between two countries a situation where one country does not engage in trade with other countries bushels

9. Study Questions and Problems #9 The following graph shows a production possibilities curve for a hypothetical less-developed country. Suppose that initially the economy is at point W. Then, suppose that an inflow of external funds from abroad permits the country to increase its capital from $3 billion to $5 billion. CAPITAL GOODS (Billions of dollars per year) 10 9 Z PPC 0 0 1 2 3 4 6 7 8 CONSUMPTION GOODS (Billions of dollars per year) 5 9 10 (?) Complete the following paragraph to explain how external financing helps the poor country achieve economic growth and development When the country is operating with only enough capital to replace depreciation, its consumption level is economy grow by reducing consumption. An inflow of external funds from abroad its subsistence level. Thus, the capital, and its production possibilities curve which Given your analysis, the country's economy will move to point production of

7. Which of the above figures represents economic growth caused by an improvement in the technology of producing product of both X and Y?     a) FIG A     b) FIG B     c) FIG C     d) FIG D