The diagram shows how the discovery of natural resources affects a country's PPC. A country discovers large deposits of natural gas that can be extracted an...
Question 1 Report
The diagram shows how the discovery of natural resources affects a country's PPC. A country discovers large deposits of natural gas that can be extracted and exported. This is most likely to cause
Answer Details
The correct answer is an increase in the country's potential economic growth.
The discovery of large natural gas deposits expands the country's natural resource base, which is one of the four factors of production (land, labour, capital, enterprise). A greater quantity of resources means the economy's productive capacity increases, which is represented by an outward shift of the PPC. This constitutes potential economic growth, as the economy can now produce more goods and services than before.
A decrease in productive capacity and an inward shift of the PPC are the opposite of what a resource discovery causes. A fall in real GDP would not be expected when a country gains access to valuable new resources that can be extracted and exported.
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