Question

Which of the following illustrates a decrease in unemployment using the PPC?

• A. A movement down along the PPC.
• B. A rightward shift of the PPC.
• C. A movement from a point on the PPC to a point inside the PPC.
• D. A movement from a point inside the PPC to a point on the PPC.

Answer 1

Answer: (D)

A movement from a point inside the PPC to a point on the PPC.

The points inside the production possibility curve reflects under-utilization of resources whereas the points on production possibility curve reflects full utilization of resources. Therefore, a shift from inside the production possibility curve to a point on it reflects increase in utilization of resources, and thus a decrease in unemployment.