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What does a rightward shift of the PPF indicate?
Economic growth; the economy can produce more of all goods.
What does a rightward shift of the LRAS curve indicate?
Economic growth; the economy can produce more at full employment.
On a PPF, what does a point inside the curve represent?
Inefficient use of resources or unemployment.
On a PPF, what does a point outside the curve represent?
Currently unattainable production levels, given current resources and technology.
How is economic growth represented on an LRAS graph?
A rightward shift of the LRAS curve.
What does the slope of the PPF represent?
The opportunity cost of producing one good in terms of the other.
What does a movement along the PPF represent?
A reallocation of resources from the production of one good to another.
What does the vertical axis of the LRAS graph represent?
Price Level.
What does the horizontal axis of the LRAS graph represent?
Real GDP.
What does a steep PPF indicate?
A high opportunity cost of producing one good in terms of the other.
How does increased technology affect the PPF?
It shifts the PPF rightward, indicating increased production possibilities.
How does increased investment in human capital affect productivity?
It increases productivity by improving the skills and knowledge of the workforce.
How does saving relate to economic growth?
Saving provides the funds for investment, which drives economic growth.
How does an increase in physical capital affect the LRAS?
It shifts the LRAS curve to the right, increasing potential output.
How does improved technology affect the aggregate production function?
It shifts the function upward, meaning more output can be produced with the same inputs.
How does a decrease in natural resources impact a country's PPF?
It shifts the PPF inward, reducing the potential output of the economy.
How does increased government spending on education affect human capital?
It increases human capital by improving the skills and knowledge of the workforce.
How does increased automation affect productivity?
It increases productivity by allowing for more efficient production processes.
How does a recession affect economic growth?
It slows down economic growth by decreasing production and investment.
How does free trade affect economic growth?
It promotes economic growth by allowing countries to specialize in the production of goods and services in which they have a comparative advantage.
Define economic growth.
A country's ability to produce more goods and services over time.
Define real GDP per capita.
The average output per person, adjusted for inflation.
Define the aggregate production function.
Shows the relationship between inputs (labor, capital) and output.
Define productivity.
How much output each worker can produce; efficiency.
Define physical capital.
Machinery, buildings, and tools used in production.
Define human capital.
The skills and education of workers.
Define investment.
Spending on capital goods to increase future output.
Define savings.
Income not spent on consumption; crucial for funding investment.
What is the LRAS curve?
Long-Run Aggregate Supply curve, represents potential output at full employment.
What is the PPF?
Production Possibilities Frontier, shows the maximum combinations of goods and services an economy can produce.