1. (Production Possibilities Frontier) Here are some data on the
U.S. economy taken from the Economic Report of the Presi- dent at http://www.access.gpo.gov/eop/.
|
Year
|
UnemploymentRate
|
RealGovernment
Spending(billions)
|
RealCivilian
Spending(billions)
|
|
1982
|
9.7%
|
$ 947.7
|
$3,672.6
|
|
1983
|
9.6
|
960.1
|
3,843.6
|
|
1996
|
5.4
|
1,257.9
|
5,670.5
|
|
1997
|
4.9
|
1,270.6
|
5,920.8
|
a. Sketch a production possibilities frontier for the years 1982 and 1983, showing the trade-off between public- sector (government) and private-sector (civilian) spending. Assume that resource availability and technology were the
same in both years, but notice that the unemployment rate was relatively high.
b. Sketch a PPF for the years 1996 and 1997. Assume that resource availability and technology were the same in both years but higher than in 1982 and 1983. Note that the unemployment rate in the late 1990s was much lower than in the early 1980s.
c. What lessons did you learn about the U.S. economy of the past 20 years?