Question

1) which of the following would an economist classify as capital?

A) a $100 traveler’s check

B) a new deposit of natural gas

C) a government savings bond

D) a police car

2) the discovery of new natural resources will cause

A) the production possibilities curve to shift up and to the right

B) the curve to shift back and to the left

C) an upward movement along the curve

D) the economy to move closer to the production possibilities curve

3) all of the following would cause the production possibilities curve to shift outward EXCEPT:

A) a decline in the unemployment rate

B) an increase in the level of capital stock

C) an improvement in technology

D) an increase in the amount of labor available

Answer 1

Ans) 1) In economics, capital is something that can enhance the working capacity. They are man made durable goods. Eg- machines, equipments, building etc.

Capital is among four factors of production. The other three are÷ land, labour and entrepreneurship.

Option d.

2) PPC shows the possible combination of goods that can be made in an economy. PPC shifts outwards if there is an increase in factors of production, like, increase in resources (natural or human), technology etc.

PPC will shift inside if there is decrease in factors of production due to any reason. For eg- war, disease etc

Option a. As discovery of natural resource will result in increase in factors of production.

3) B,C and D will result in an outward shift in PPC. But the decrease in unemployment means that earlier economy was operating inside the PPC and now it is moving closer to PPC.

Option a.