Question

There is unemployment in the country. Government launches employment guarantee schemes. Explain its effect

Answer 1

As the economy earlier was going through unemployment which means that earlier the economy was producing at a point below the PPC. This is because unemployment implies inefficient use of resources and this inefficient use of resources is depicted by point F in the below diagram. On the other hand as the employment increases through the employment guarantee scheme of government the production point will now be depicted on the PPC. i.e. All the points lying on the PPC, that is curve AE. They are associated with different quantities of good 1 and good 2 produced, by employing the available resources fully and in an efficient manner.