ECO 202 Lecture for week 2
The first fundamental economic issue, "What to create," is answered by the PPF. It serves as a
visual representation of the idea that we must sacrifice some things in order to obtain more of
others. Describe your reasoning. The PPF demonstrates the kind of things we may generate in
combination when we utilize our resources effectively. By "productive," we mean that all of our
resources are used to generate the goods that they are best equipped to produce and that none of
our resources are idle.
Scenario: The traditional PPF instance demonstrates a society's decision between spending on
the military ("weapons") and consumption ("butter"). It is more likely that we would be
somewhere in between manufacturing some of both butter and weapons. A community may be
devoting all of its resources to military spending and creating no consumer products, or vice
versa. Since our resources are limited, it is likely that during times of conflict we will see an
increase in military spending at the price of "butter" or consumer spending. This is the cause of
the PPF's decreasing inclination.
The US involvement in World War II, followed by the years of the Korean War, were times
distinguished by a growth in military spending, according to an examination of the Economics
Report of the President over the years. Spending on goods and services decreased as a result of
this rise. From 1987 to 1998, when the cold war came to an end, military spending decreased
globally. However, we are once more witnessing a rise in military spending globally. SIPRI
(Stockholm International Peace Research Institute) states that the 839 billion USD in total global
military expenditures in 2001 represented a sizable share of global economic resources. It
contributed an average of 2.6% of the world's GDP and 137 dollars per person. Because of the
expenditures of the Afghan war and, in the long run, because of the shift in political support for
higher military spending, 9/11 attacks has already had a significant influence on US military
spending. At 48 billion dollars, the increase in US budget power for defense in fiscal year 2003
is greater than the combined defense budgets of all other serious military spenders, including
Russia, France, Japan, and the UK.
