Question

In deciding "What to produce", the economy should focus on the production of:

• A. Capital Goods only
• B. Consumer Goods only
• C. Both (a) and (b)
• D. Neither (a) nor (b)

Answer 1

The correct option is C Both (a) and (b)

An economy will require an optimal proportion of consumer and capital goods in order to be sustainable in the long run. If too much focus is put into producing consumer goods, the future consumption and growth will be limited as capital goods are required in the production of consumer goods. If too much focus is put into producing capital goods, the current consumption will be limited.