What effect does a decrease in stock of capital have on the ppf
What effect does a decrease in stock of capital have on the ppf
Homework Answers
A decrease in the stock of capital causes the PPF shifts to the
LEFT.
Fewer Capital Goods means less production of other capital goods
and less production of many Consumer Goods.This will lead to a
highly undesirable thing---the PPF, or our potential to produce
goods now and in the future, is going to diminish as shown in the
diagram.
Relative to the PPF before, we have permanently reduced our current productive capacity and greatly reduced our future ability to produce Capital and Consumer goods. This will not bode well for the next generation, who may see fewer opportunities and a reduced standard of living.
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