The following graph shows a production possibilities curve for a hypothetical less-developed country. Suppose that initially the economy is at point B. Then, suppose that an inflow of external funds from abroad permits the country to increase its capital from $5 billion to $6 billion. CAPITAL GOODS (Billions of dollars per year) 10 B D C PPC2 0 1 2 3 4 5 8 7 8 9 10 CONSUMPTION GOODS (Billions of dollars per year) (?) How could external financing help this poor country achieve economic growth and development? O Initially, the consumption is above the subsistence level. Capital decreases, which shifts the production possibilities curve inward, which enables production of consumer goods. Initially, the consumption is at the subsistence level. Capital increases, which shifts the production possibilities curve outward, which enables production of consumer goods. Initially, the consumption is below the subsistence level. Capital increases, which shifts the production possibilities curve inward, which enables production of capital goods. O Initially, the consumption is above the subsistence level. Capital increases, which shifts the production possibilities curve inward, which enables production of consumer goods. Given your analysis, the country's economy will move to point
The following graph shows a production possibilities curve for a hypothetical less-developed country. Suppose that initially the economy is at point B. Then, suppose that an inflow of external funds from abroad permits the country to increase its capital from $5 billion to $6 billion. CAPITAL GOODS (Billions of dollars per year) 10 B D C PPC2 0 1 2 3 4 5 8 7 8 9 10 CONSUMPTION GOODS (Billions of dollars per year) (?) How could external financing help this poor country achieve economic growth and development? O Initially, the consumption is above the subsistence level. Capital decreases, which shifts the production possibilities curve inward, which enables production of consumer goods. Initially, the consumption is at the subsistence level. Capital increases, which shifts the production possibilities curve outward, which enables production of consumer goods. Initially, the consumption is below the subsistence level. Capital increases, which shifts the production possibilities curve inward, which enables production of capital goods. O Initially, the consumption is above the subsistence level. Capital increases, which shifts the production possibilities curve inward, which enables production of consumer goods. Given your analysis, the country's economy will move to point
Chapter2: Productions Possibilities, Opportunity Costs, And Economic Growth
Section2.7: Present Investment And The Future Production Possibilities Curve
Problem 1GE
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Transcribed Image Text:The following graph shows a production possibilities curve for a hypothetical less-developed country. Suppose that initially the economy is at point B.
Then, suppose that an inflow of external funds from abroad permits the country to increase its capital from $5 billion to $6 billion.
CAPITAL GOODS (Billions of dollars per year)
10
B
D
C
PPC2
0
1 2 3 4
5
8
7
8
9
10
CONSUMPTION GOODS (Billions of dollars per year)
(?)
How could external financing help this poor country achieve economic growth and development?
O Initially, the consumption is above the subsistence level. Capital decreases, which shifts the production possibilities curve inward, which
enables production of consumer goods.
Initially, the consumption is at the subsistence level. Capital increases, which shifts the production possibilities curve outward, which
enables production of consumer goods.
Initially, the consumption is below the subsistence level. Capital increases, which shifts the production possibilities curve inward, which
enables production of capital goods.
O Initially, the consumption is above the subsistence level. Capital increases, which shifts the production possibilities curve inward, which
enables production of consumer goods.
Given your analysis, the country's economy will move to point
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