An economy is initially operating at point A, producing inside its first production possibility frontier (PPF1PPF_1PPF1). Over the next year, the economy moves its production to point B on PPF1PPF_1PPF1. During the same period, the productive frontier shifts outwards to PPF2PPF_2PPF2.
Which of the following correctly identifies the type of economic growth represented by the movement from A to B and the shift from PPF1 PPF_1\,PPF1 to PPF2PPF_2PPF2?
Movement from A to B represents potential economic growth; shift from PPF1PPF_1PPF1 to PPF2PPF_2PPF2 represents actual economic growth.
Movement from A to B represents actual economic growth; shift from PPF1PPF_1PPF1 to PPF2PPF_2PPF2 represents potential economic growth.
Movement from A to B represents actual economic growth; shift from PPF1PPF_1PPF1 to PPF2PPF_2PPF2 represents a reduction in the negative output gap.
Movement from A to B represents potential economic growth; shift from PPF1PPF_1PPF1 to PPF2PPF_2PPF2 represents a short-run aggregate supply shift.
