Question

Draw a PPC for the US in 2019 for capital goods and consumer goods, and plot a point on the graph that might illustrate where the US currently allocates its resources.

Answer 1

Answer:

The US is a developed economy. Also, Capital goods are the goods that help the businesses in producing consumer goods Consumer goods are the goods that are being consumed by the consumers and are not used anytime further than that. Hence, consumption is going to be quite a lot as people have money and also are developed, and meantime the requirement for capital goods is going to decrease as the US is already up with it, and hence least. And even if the requirement for Capital goods increases, the requirement for consumer goods is going to increase many many more folds. And hence the graph is as shown in the attachment, with P being with a quite low value for capital goods, and consumer goods automatically come out to be more through the PPC graph. Hence, we need not assume that. One way to explain this is that people will have more money as the government will take fewer taxes, as capital goods are no more required in bulk.

Explanation:

However, the requirement of Capital goods can increase anytime, and consumption might decrease as that will affect the GDP. Though this is not expected in US society as its one of the most developed in the world, and Government is not expected to do any mistake.