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)

Question

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 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.

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

Answer 1

The correct response is:

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

An increase in unemployment indicates that fewer resources (namely labor) are being utilized in the economy, which effectively reduces the economy's productive capacity. Thus, the production possibilities curve (PPC) would shift inward as the maximum level of production decreases due to underutilized resources.