Question

Which of the following events would create economic growth, that is, shift the production possibilities frontier outward?

1) Increase in technology and innovation
2) Decrease in government spending
3) Increase in unemployment rate
4) Decrease in consumer spending

Answer 1

An increase in technology and innovation is the event that would create economic growth by shifting the production possibilities frontier outward, as it enhances productive efficiency and increases output with current resources.The correct answer is option 1.

Step-by-step explanation:

The question is assessing which events would create economic growth and shift the production possibilities frontier (PPF) outward.

Among the provided options, the event that would definitively create economic growth by shifting the PPF outward is an increase in technology and innovation.

This improvement in technology reduces the cost of production, thus increasing the level of production with given resources and expanding the PPF.

On the other hand, decreases in government spending and consumer spending, as well as increases in the unemployment rate, are typically associated with a contraction in economic activity and would not shift the PPF outward.The correct answer is option 1.