Describe the adjustments in the production possibilities curves in each of the following situations for the United States economy. You should use a graph of a production possibilities curve in your explanation of each scenario. The two goods being produced in the economy are capital goods (or public spending) and consumer goods (or private spending). Place “Capital Goods” on the vertical axis and “Consumer Goods” on the horizontal axis.

Question

a. The economy moves from full employment into a deep recession.
b. The United States experiences a sever plague that kills one-fourth of the population, including many in the labor force.
c. Congress significantly increases government spending for the Department of Defense, a capital good.
d. A new wave of immigration from Canada significantly increases our labor force.

Answer 1

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