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March 27, 2017

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The domestic economy's consumption possibilities curve can be greater than the domestic economy's production possibilities curve. Why is this true?

  • economics - ,

    One reason is the ability to borrow; we can consume more domestic and foreign goods today at the expense of consuming less tomorrow.

    Another reason is inventory buildups. We made goods than we consumed yesterday. So today, we can consume more today than we produce today.

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