Chinaʹs State Council has encouraged more spending to ʺimprove transportation links and other infrastructure... .ʺ It will also ʺstep up its spending on vocational training and other educational programs for adults.ʺ
Suppose that capital goods are on the vertical axis while consumption goods are on the horizontal axis of Chinaʹs PPF. As a result of enacting the policies, we would expect
i. an expansion of Chinaʹs production possibilities.
ii. capital accumulation.
iii. an increase in human capital
A) i, ii and iii.
B) ii and iii only.
C) i and ii only.
D) i and iii only.

Question

Quizplus · Accepted Answer

Enacting policies to improve transportation links and infrastructure and to increase spending on vocational training and education programs for adults will result in an expansion of China's production possibilities (i), as more and better capital goods and human capital will be available for production. Additionally, this will lead to capital accumulation (ii) as the increased spending on infrastructure will likely lead to more investment in capital goods. The increase in spending on vocational training and education programs will also result in an increase in human capital (iii).

Chinaʹs State Council Has Encouraged More Spending to ʺImprove Transportation