This topic contains a solution. Click here to go to the answer

Author Question: Why does the production possibilities frontier have a bowed out shape rather than being a straight ... (Read 89 times)

Beheh

  • Hero Member
  • *****
  • Posts: 520
Why does the production possibilities frontier have a bowed out shape rather than being a straight line?
 
  What will be an ideal response?

Question 2

The above table presents data for the nation of Economica.
 
  a. What is the aggregate planned expenditure and unplanned inventory change at each level of real GDP?
  b. At what level of real GDP is equilibrium expenditure achieved?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

huda

  • Sr. Member
  • ****
  • Posts: 304
Answer to Question 1

The fact that as the production of one good or service increases, its opportunity cost increases means that the production possibilities frontier will be bowed out. Only if the opportunity cost remained constant as the production of a good increases would the production possibilities frontier be a straight line.

Answer to Question 2

a. When real GDP is 0, aggregate planned expenditure (the sum of C + I + G + X - M) equals 4.5 trillion and unplanned inventory change (the difference between GDP and aggregate planned investment) is -4.5 trillion. When real GDP is 2.5 trillion, aggregate planned expenditure is 5.5 trillion and unplanned inventory change is -3.0 trillion. When real GDP is 5.0 trillion, aggregate planned expenditure is 6.5 trillion and unplanned inventory change is -1.5 trillion. When real GDP is 7.5 trillion, aggregate planned expenditure is 7.5 trillion and unplanned inventory change is 0. And when real GDP is 10 trillion, aggregate planned expenditure is 8.5 trillion and unplanned inventory change is 1.5 trillion.
b. Equilibrium expenditure occurs when unplanned inventory change is 0, or, equivalently, when real GDP equals aggregate planned expenditure. In this problem, equilibrium expenditure occurs when real GDP is 7.5 trillion.




Beheh

  • Member
  • Posts: 520
Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)


tuate

  • Member
  • Posts: 332
Reply 3 on: Yesterday
Excellent

 

Did you know?

In inpatient settings, adverse drug events account for an estimated one in three of all hospital adverse events. They affect approximately 2 million hospital stays every year, and prolong hospital stays by between one and five days.

Did you know?

About 60% of newborn infants in the United States are jaundiced; that is, they look yellow. Kernicterus is a form of brain damage caused by excessive jaundice. When babies begin to be affected by excessive jaundice and begin to have brain damage, they become excessively lethargic.

Did you know?

Famous people who died from poisoning or drug overdose include, Adolf Hitler, Socrates, Juan Ponce de Leon, Marilyn Monroe, Judy Garland, and John Belushi.

Did you know?

The lipid bilayer is made of phospholipids. They are arranged in a double layer because one of their ends is attracted to water while the other is repelled by water.

Did you know?

All adults should have their cholesterol levels checked once every 5 years. During 2009–2010, 69.4% of Americans age 20 and older reported having their cholesterol checked within the last five years.

For a complete list of videos, visit our video library