Reference no: EM131408045

1. Based on the reality in economy that we have limited resources to meet our needs then people face the fact to make choices for meeting the needs. There are many possibilities and choices can be offered by the economy given the limited resources. This is the original idea behind the concept of production possibility frontier. This concept demonstrates the option of two different products at one point in time, surely the possible combination is large. One important factor that plays deterministic role in the concept is opportunity cost. The higher the output of goods is going to impact less of opportunity cost .  The more choices people has in allocation of the limited resources normally increases the opportunity cost. Surely the decision to be made among many alternatives should represent the best way to leverage limited resources available. It is a powerful tool to explain the economic decision by the market. Every point in the PPF curve reflects efficiency and the economy has fully utilized the available resource for production or so called "pareto efficiency". The concept of possible possibility frontier will bring us to useful benefit that it sets the direction on how the economy will move, secondly it emphasizes that there are a rigidities and imperfection factors in the economy which will prevent us to achieve some decision outside of available resources.

2. when we raise a question, if we have too much debt, why the government does not simply print more money a solution to the problem. One of the Ten Principle of Economics deals with price will rise when government print too much money. Many economists have discussed this simply because printing more money does not make more economic output in the real world, instead the inflation will increase as the result.

When we take another example, people in a country will not getting better of even though the GDP increases when at the same time the price of good and services is much more expensive. To illustrate this concept in simple way, suppose the government increases the money supply by double, and the economy produce the same amount of goods. People have more money and will trigger the increase of demand of the goods and supplier at the same time raises the prices. So, doubling the amount of money supply with the same amount of goods supplied but much more expensive price, clearly does not make people better off. In summary printing more money will make more problem than resolve it. Normally government sells the bonds to finance the national debt but if the government prints too much money that increase the inflation, this will lower the value of that bonds.