Question

Q4. Production in an economy is below its potential due to unemployment. Government starts employment schemes. Explain its effect using PPC?

Answer 1

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. 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 such as a point X in figure.

Answer 2

At the point when the economy is underneath its potential because of joblessness, the economy works inside the PPC. At the point when the administration begins business age plot, it empowers the economy to use its current assets in the ideal way. The assets which were sitting inactive, now get position and the economy capacities at its greatest limit and moves from inside the PPC to focuses on the PPC.

Thus, economy moves from point ‘a’ below PPC to any point on PPC as shown in the below diagram.