A Movement from a Point Inside the Production Possibilities Frontier

question 42

Multiple Choice

A movement from a point inside the production possibilities frontier to a point on the production possibilities frontier represents

• A) full employment of labour but not capital.
• B) an infinite opportunity cost.
• C) a free lunch.
• D) a tradeoff.
• E) unemployment of labour but not capital.

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Definitions:

John Maynard Keynes

A British economist whose theories on the causes of prolonged unemployment and the role of government intervention in economies formed the basis of Keynesian economics.

Full Employment

A condition in the economy where all potential labor forces are utilized in the most economically effective manner.

Market Economy

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.

Aggregate Demand

The sum total of all economic needs for goods and services, appraised at a constant overall price level in a stated period.