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 91 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
Excellent


nguyenhoanhat

  • Member
  • Posts: 332
Reply 3 on: Yesterday
Gracias!

 

Did you know?

Amoebae are the simplest type of protozoans, and are characterized by a feeding and dividing trophozoite stage that moves by temporary extensions called pseudopodia or false feet.

Did you know?

The FDA recognizes 118 routes of administration.

Did you know?

The types of cancer that alpha interferons are used to treat include hairy cell leukemia, melanoma, follicular non-Hodgkin's lymphoma, and AIDS-related Kaposi's sarcoma.

Did you know?

Persons who overdose with cardiac glycosides have a better chance of overall survival if they can survive the first 24 hours after the overdose.

Did you know?

Medication errors are three times higher among children and infants than with adults.

For a complete list of videos, visit our video library