How might a nations production possibilities be affected by

How might a nation’s production possibilities be affected by the following? 1. An increase in military spending. 2. An increase in college tuition.

Solution

An increase in military spending means that the govenment has sacrificed consumer goods to produce war goods. This is just using the money for production of a different commodity. This will only lead to movement on the same production possibility curve say from a combination A to combination B. As there is no increase in the resources but only a reallocation of resources. If this increase in spending on military improves the research and development arena in the country the PPC may shift outward in the near future.

The increase in college tuition is not an increase in resources but again a resource reallocation, that is the economy will shift their spending from other goods to college tuition. They are compelled to. So this is again reallocation of resources which will lead to movement along the same PPC from say, combination A to conbination B on the same Transformation curve.