Question

Economic growth may be represented by a (an):

A. Inward shift of the production possibilities curve.
B. Outward shift of the production possibilities curve.
C. Movement along the production possibilities curve.
D. None of the above.

Answer 1

The correct answer is B.Economic growth is represented by an outward shift of the production possibilities curve and an increase in potential GDP as shown in the AD/AS diagram, due to factors.

Step-by-step explanation:

Economic growth can be represented by an outward shift of the production possibilities curve.

This shift indicates that an economy has expanded its capacity to produce goods and services, often due to factors like increased productivity, more labor, and more capital.

Within an AD/AS diagram, long-term economic growth is reflected in a gradual shift to the right of the aggregate supply curve, representing an increase in potential GDP or full employment level of GDp.

This growth is facilitated by investments in physical and human capital, technological advancements, and an economy's ability to undergo catch-up growth.