Final answer:
A decrease in economic growth and an inward shift of the PPF can result from a reduction in resources, a decrease in productivity, cuts in R&D funding, a major trading partner’s recession, reduced consumer confidence, and decreased government spending.
Step-by-step explanation:
Factors that can cause a decrease in economic growth and an inward shift of the production possibilities frontier (PPF) include a reduction in the availability of resources, such as labor or capital, and a decrease in productivity, often due to lower levels of technology or innovations. For instance, cuts in research and development (R&D) funding can reduce productivity growth, exemplified by a leftward shift in the short-run aggregate supply (SRAS) curve, leading to lower equilibrium gross domestic product (GDP) and a higher price level. Furthermore, negative external shocks like a recession in a major trading partner can decrease exports, as seen when a country like Mexico enters a recession, reducing its GDP and thus imports from other countries, which can also shift the aggregate demand (AD) curve to the left, resulting in decreasing GDP and price level of the exporting country.
Likewise, an unexpected decrease in gvernment spending or an adverse event that lowers consumer confidence can result in a leftward shift of the AD curve, causing economic contraction. Understandably, an economic situation can also be impacted by a decrease in energy prices; however, this would generally result in a positive supply shock, shifting the AS curve to the right and resulting in more real GDP at a lower price level, which is the opposite effect of what causes an inward shift of the PPF.