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    Growth and the PPF

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    I would appreciate any help that I can get to answer the two parts to this question. Please view the attachment for the production possibilities frontier chart.

    1. (Growth and the PPF) Use the production possibilities frontier (PPF) to demonstrate economic growth.

    a. With consumption goods on one axis and capital goods on the other, show how the combination of goods selected this period affects the PPF in the next period?

    b. Extend this comparison by choosing a different point on this period's PPF and determining whether the combination leads to more or less growth over the next period.

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    Solution Preview

    The key to understanding this question is to think of how capital goods are used. Capital goods include such things as machinery. These products are involved in most types of production. Consumer goods, however, are simply used up. They do not feed back into ...

    Solution Summary

    Consumer and capital goods as they relate to future economic growth are examined. The comparison by different points on this period's PPF are provided.