Economic slowdown in some parts of the world has adversely affected demand for Indian exports. What will be its effect on the production possibilities frontier of India? Explain.

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Solution

There will be no effect on PPF. It is because PPF shows only what a country can potentially produce, and not what it actually produces. Slow down by reducing demand for exports may ultimately bring down output. Assuming that the country's actual production is somewhere on the PPF, Slowdown may result in the country producing at a point somewhere below the PPF.

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