Question

Imagine two government budgets, each $100. The first allocates $50 to the provision of public goods and $50 to transfer payments. The other allocates $75 to the provision of public goods and $25 to transfer payments. If GDP were $500, explain why the two budgets would generate different positions on a production possibilities curve, with private good production measured on the vertical axis and public goods production on the horizontal. Graph the two curves.


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  • CreatedApril 21, 2015
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