Production in an economy is below its potential due to unemployment. Government starts employment generation schemes. Explain its effect using production possibility curve.

Production in an economy is below its potential due to unemployment. G

1.	Production in an economy is below its potential due to unemployment. Government starts employment generation schemes. Explain its effect using production possibility curve.
Answer» Solution :Production below the potential means that total production in the economy is somewhere below the production possibility curve PP' , for example at point U, in the diagrame. When GOVERNMENT starts employment generation schemes, and since the production is below potential level due to unemployment and REACH the potential. the MOVEMENT FORWARDS is towards the PP' curve.