Question

In Figure 10-2, if the economy acquires a larger amount of capital goods in the current year, does a larger or smaller outward shift in the production possibilities curve result? Does the LRAS curve shift more or less far to the right? Why?

Short answer

The huge acquisition of capital merchandise accordingly causes a development along the PPF from A to B and causes a not exactly proportionate change in the PPF and LRAS to one side.

Step-by-step solution

introduction

The makers change the creation levels to meet the inflated expense of creation. In this manner, over the long haul, the inventory doesn't change in response to changes in the total interest

explanation

The capital stock secured in a huge sum converts into the genuine creation throughout a given timeframe. The stock usage is subject to different elements like ability, work efficiency, new innovation and so forth. The change in the PPF characterizes an expansion in the creation potential over the long haul because of further developed innovation, capital and work staying unaltered.