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 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 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 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.

Answer 1

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

Explanation: Unemployment means the economy is operating inside the PPF (producing less than its potential). The PPF itself (the economy's maximum potential) only shifts if resources, technology, or institutional factors change.