Fig. 1 shows two possible production points for an economy producing consumer goods and capital goods. Point B is reached after increased investment in mach...
Question 1 Report
Fig. 1 shows two possible production points for an economy producing consumer goods and capital goods. Point B is reached after increased investment in machinery.
(a) Which point has the greater output of capital goods? [1]
(b) Explain why investment in capital goods may raise economic growth in the future. [1]
Answer Details
(a) Point B has the greater output of capital goods. [1] It is higher on the vertical capital-goods axis than point A.
(b) Investment in capital goods can provide more or better machinery. This raises productivity or productive capacity, increasing potential output and therefore future economic growth. [1]
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