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Production in an Economy is Below Its Potential Due to Unemployment. Government Starts Employment Generation Schemes. Explain Its Effect Using Production Possibilities Curve. - CBSE (Arts) Class 12 - Economics

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Question

Production in an economy is below its potential due to unemployment. Government starts employment generation schemes. Explain its effect using production possibilities curve.

Solution

When an economy is producing below its potential level because of unemployment, it implies that the economy is not functioning on the PPC but below the PPC, i.e. Point P as shown in the below diagram. Given the resources and technology, along with the initiation of government schemes, the employment level will increase. Therefore, Point P will shift nearer to PPC.

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Solution Production in an Economy is Below Its Potential Due to Unemployment. Government Starts Employment Generation Schemes. Explain Its Effect Using Production Possibilities Curve. Concept: Concepts of Production Possibility Frontier.
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