Production in an economy is below to its potentiality due to unemployment. Government starts employment generation schemes. Explain its effects by using production possibility curve.
Production possibility curve is a curve which depicts all the possible combinations of goods which can be produced with given resources and technology in an economy i.e., producing goods at its full potentiality. Production below the potentiality means that total production in the economy is somewhere below the production possibility curve PPi; for example, point U in the diagram. We know production below the production possibility curve highlights unemployment. When government starts employment generation schemes, the economy moves towards the full employment, thereby removes unemployment. So, economy comes back to its potential level.
Value: Analytic
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