Question

Suppose an economy experiences an increase in unemployment across all industries. What is the result of this increase in unemployment on the production possibilities curve?(1 point)
Responses

The level of unemployment has no effect on the production possibilities curve, so there would be no change to the production possibilities curve.
The level of unemployment has no effect on the production possibilities curve, so there would be no change to the production possibilities curve.

The curve would shift outward because labor is considered a factor of production. By increasing productive resources, the maximum level of production will increase.
The curve would shift outward because labor is considered a factor of production. By increasing productive resources, the maximum level of production will increase.

The slope of the production possibilities curve would decrease because an increase in unemployment would decrease the maximum level of production.
The slope of the production possibilities curve would decrease because an increase in unemployment would decrease the maximum level of production.

The curve would shift inward because labor is considered a factor of production. By reducing productive resources, the maximum level of production will decrease.
The curve would shift inward because labor is considered a factor of production. By reducing productive resources, the maximum level of production will decrease.

Answer 1

The correct response is:

**The level of unemployment has no effect on the production possibilities curve, so there would be no change to the production possibilities curve.**

Explanation: While an increase in unemployment indicates that not all resources (including labor) are being used efficiently, it does not change the economy's production capabilities represented by the production possibilities curve (PPC). The PPC reflects the maximum possible production of two goods when resources are fully and efficiently employed; an increase in unemployment represents an inefficiency that leads to production being inside the curve, but does not shift the curve itself.