If all the resources are used in the production of cloth, the curve which gives the maximum amount of cloth produced in the economy for any given amount of machine is called?

Production Possibility Frontier.

The correct answer is Option (2) → Production Possibility Frontier.

The Production Possibility Frontier (PPF) shows the maximum possible output combinations of two goods (like cloth and machines) that an economy can produce given its resources and technology. If all resources are used for producing cloth, the PPF shows the maximum amount of cloth that can be produced for any given amount of machines forgone.

Option 1: Production Possibility Set. This refers to all possible combinations of goods that can be produced, including inefficient combinations (where some resources may be unused). It is not limited to the maximum possible output, so it includes points inside and on the PPF, but not just the efficient frontier.

Option 3: Isoquant Curve. This represents all combinations of inputs (like labor and capital) that produce a given level of output of a single good. It's about input combinations for a given output, not maximum output of one good given another.

Option 4: Indifference Curve. This represents all combinations of two goods that give a consumer equal satisfaction or utility. It is part of consumer theory and is unrelated to production capabilities or how resources are used in the economy.