ppf stuf

Question 1

does unemploymemt affect the ppf

Answer 1

An increase in unemployment means that the economy is no longer producing on the PPF. Any point on the PPF requires that all resources are being fully employed. So, an increase in unemployment will move the cross (which shows what the economy is actually producing) inside the PPF. However, it will have no impact on the PPF as the economy’s potential to produce has not changed. If all the people who are now unemployed were able to get a job again then the economy could produce just as much as it was producing before.