Question

Assume the economy can produce either sports utility vehicles (SUVs) or minivans. The graph below depicts the current production possibilities frontier (PPF). Suppose the economy experiences a large increase in immigration. Move the end points of the PPF below to show how the PPF changes. Assume that the increase in immigration affects the economy's ability to produce both minivans and SUVs.

This is an example of:
a. economic contraction.
b. economic stagnation.
c. economic recession
d. economic growth.

Answer 1

d. economic growth.

Step-by-step explanation:

When the economy experiences a large increase in immigration, labor, a factor of production, increases. An increase in a factor of production will cause the PPF to shift outward, away from the origin because it can now produce more minivans and sports utility vehicles. This is an example of economic growth because the economy can produce more of all goods.

Economic contraction and recession both refer to an economy, for whatever reason, producing fewer goods and services than previously. Economic stagnation refers to an economy which is neither increasing nor decreasing its production possibilities.