PPF Flashcards

1
Q

What is PPF?

A

Illustrates the maximum potential output of an economy when all resources are fully employed

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2
Q

What are capital goods?

A

They are goods which are required to produce other goods

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3
Q

What are consumer goods?

A

Those that give utility to consumers

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4
Q

What do points on the PPF indicate?

A

They indicate that the maximum productive potential of an economy and resources are being used efficiently

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5
Q

What do points inside the PPF indicate?

A

They imply that resources are not being allocated efficiently.

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6
Q

When is there unobtainable production?

A

Any point outside the PPF is currently unobtainable unless there is economic growth

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7
Q

What is marginal analysis?

A

It is concerned with the impact of additions or subtractions from the current situation

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8
Q

What is economic growth?

A

Refers to an increase in the productive capacity of the economy indicating an increase in real output

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9
Q

What is economic decline?

A

Refers to a decrease in the productive capacity of the economy indicating a decrease in real output

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10
Q

What are movements along a PPF caused by?

A

A change in the combination of goods produced

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11
Q

What are right shifts in the PPF caused by?

A

new natural resources

new methods of production that increase productivity

advances in technology

improvements in education and training

factors that lead to an increase in the size of workforce

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12
Q

What are left shifts in the PPF caused by?

A

natural disasters

depletion of natural resources

factors reducing the size of the workforce

deep recession that results in the loss of productive capacity

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