Economic slowdown in some parts of the world has adversely affected demand for Indian exports. What will be its effect on the production Possibilities frontier of India? Explain.

Explanation

There will be no effect on Production Possibility Frontier (PPF). It is because PPF shows only what a country can potentially produce, and not what it actually produces. Slowdown by reducing demand for exports may ultimately bring down output. Assuming that the country.s actual production is somewhere on PPF, Slowdown may result in the country producing at a point somewhere below PPF as shown in the figure at point U.
Value: Analytic