Question

During the Second World War, Germany’s

factories were decimated. It also suffered many human

casualties, both soldiers and civilians. How did the war

affect Germany’s production possibilities curve?

Short answer

The war would shift PPC inwards.

Step-by-step solution

Production Possibility Curve Concept

PPC shows combinations of two goods, that an economy can produce with given fixed resources & constant technology.

It is based on following assumptions

• Resources are given fixed, and technology is constant
• The economy produces only two goods.

Detailed Explanation 

War leads to destruction of both physical & financial, human resources.

So, this resultant decrease in resources implies that economy has lesser capability to produce both the goods.

Hence, the PPC shifts inwards ie leftwards & downwards moment - depicting lesser production capabilities of both goods.