The question ‘Are the resources of the economy fully employed?’ is studied in one branch of economics. If the answer is ‘no’, where would the economy’s combination of output lie?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Macroeconomics; strictly below its production possibility frontier
Whether all the economy’s resources are employed is a question about the whole economy, studied in macroeconomics. If they are not fully employed, output lies at a point strictly below the frontier.
Option (1) Microeconomics; beyond its production possibility frontier — Incorrect. It is a macro question, and a point beyond the frontier cannot be produced at all.
Option (2) Microeconomics; strictly below its production possibility frontier — Incorrect. The point is right, but a question about all the economy’s resources belongs to macroeconomics.
Option (3) Macroeconomics; on its production possibility frontier — Incorrect. Macroeconomics is right, but a point on the frontier means resources are fully utilised.
Option (4) Macroeconomics; strictly below its production possibility frontier — Correct. Both parts fit: a macro question, and idle resources put output below the frontier.
NCERT (2026-27): “1.5 Microeconomics and Macroeconomics Some of the important questions that are studied in macroeconomics are as follows: What is the level of total output in the economy? How is the total output determined? How does the total output grow over time? Are the resources of the economy (eg labour) fully employed? What are the reasons behind the unemployment of resources? Why do prices rise? Thus, instead of studying the different markets as is done in microeconomics, in macroeconomics, we try to study the behaviour of aggregate or macro measures of the performance of the economy.” “Production Possibility Frontier The production possibility frontier gives the combinations of corn and cotton that can be produced when the resources of the economy are fully utilised. Note that a point lying strictly below the production possibility frontier represents a combination of corn and cotton that will be produced when all or some of the resources are either underemployed or are utilised in a wasteful fashion.” |