Subsidy Impact on Production Possibilities Curve
How would a subsidy on capital goods most likely affect a country’s production possibilities curve (PPC) in the long run?
A
There will be no change as subsidies don’t affect productive capacity directly.
B
It will cause immediate inward PPC movement due to inefficient allocation.
C
The subsidy leads directly to a new equilibrium point on the existing PPC curve itself.
D
It can result in outward PPC growth over time due to increased capital stock.
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