Question

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

Answer 1

Explanation:

HEY MATE AS YOU KNOW THAT, FIRSTLY, THE PRODUCTION IN THE ECONOMY IS BELOW ITS POTENTIAL DUE TO UNEMPLOYMENT, THIS MEANS THAT THE ECONOMY IS OPERATING AT A POINT BELOW THE PRODUCTION POSSIBILITY CURVE (PPC) SUCH AS A POINT V IN FIGURE. AS THE GOVT STARTS EMPLOYMENT SCHEMES, THE UNEMPLOYED RESOURCES GETS UTILIZED IN AN OPTIMUM MANNER.

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Answer 2

When the government starts employment generation scheme, it enables the economy to utilise its existing resources in the optimum manner. The resources which were sitting idle, now get job and the economy functions at its maximum capacity and moves from inside the PPC to points on the PPC