Production in an economy is below its potential due to unemployment, government starts employment generation schemes. Explain its effect using PPC.

Explanation

Since the economy is featured by unemployment, so it means that the economy is operating at a pint inside the PPC. Now, when the government initiates the employment generation schemes, so it implies there will be higher number of employed in the economy and the economy is utilising greater and greater of its resources. Simultaneously, the economy will continue to shift to a point on the PPC. Thus, the economy will move from a point which is inside the PPC to a point on the PPC.