Explain how it is possible for the economy to produce at a point beyond its institutional production possibilities frontier (PPF), but not beyond its physical PPF
The physical PPF represents the maximum combinations of goods that can be produced with a fixed amount of resources and technology, so it is currently impossible for production to occur beyond this level. The institutional PPF represents the maximum combinations of goods that can be produced with fixed resources and technology, plus the institutional constraints of that society. When forces within the economy cause people to relax their customary social constraints, it is possible for that economy to produce beyond its institutional PPF.
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Which of the following correctly identifies a Malthusian cycle?
A) Increase in GDP would increase GDP per capita above subsistence, which will cause an increase in the size of population which would increase pressure on resources and eventually reduce GDP per capita. B) Increase in GDP would increase GDP per capita above subsistence, which will cause a decrease in the size of population that would reduce pressure on resources and increase GDP per capita further. C) Decrease in GDP would decrease GDP per capita below subsistence, which will cause an increase in the size of population which would increase pressure on resources and eventually reduce GDP per capita. D) Increase in GDP would increase GDP per capita above subsistence, which will cause an increase in the size of population that would increase pressure on resources and that would further increase GDP per capita.
Assume the federal government raises taxes (a contractionary fiscal policy). If the tax increase affects AS and AD equally, then real GDP will ________ and the price level will ________
A) decrease; decrease B) increase; be unchanged C) increase; increase D) decrease; be unchanged E) increase; decrease
The Sherman Antitrust Act states that if a person can prove that he was damaged by an illegal arrangement to restrain trade, he could sue and recover three times the damages he sustained
a. True b. False Indicate whether the statement is true or false
Which of the following statements is normative?
A. A large budget surplus is likely to lower interest rates. B. High taxes tend to decrease saving. C. When the Federal Reserve increases the money supply, interest rates decrease. D. Large budget deficits should be avoided.