Using a production possibilities frontier (PPF) diagram, determine how does the PPF change in response to the events describe below. Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing. a) A relaxation of policies allowing more foreign direct investment into the country. b) Increasing the minimum wage level. c) A decrease in expenditure on research and development. d) An increase in the retirement age. e) Government policies supporting the provision of services, without affecting manufacturing.
Using a production possibilities frontier (
in response to the events describe below.
Make sure to explicitly indicate what sectors you are representing, and what sort of
assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter
follows from your assumptions on the factor intensity of the sector you are representing.
a) A relaxation of policies allowing more foreign direct investment into the country.
b) Increasing the minimum wage level.
c) A decrease in expenditure on research and development.
d) An increase in the retirement age.
e) Government policies supporting the provision of services, without affecting
manufacturing.
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