ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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 would be most likely to lead to the rise in the saving rate you just
illustrated?
Increasing production of investment and consumption goods
Decreasing production of investment and consumption goods
Decreasing production of investment goods and increasing production of consumption
goods
Increasing production of investment goods and decreasing production of consumption
goods
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Transcribed Image Text: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 would be most likely to lead to the rise in the saving rate you just illustrated? Increasing production of investment and consumption goods Decreasing production of investment and consumption goods Decreasing production of investment goods and increasing production of consumption goods Increasing production of investment goods and decreasing production of consumption goods
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