cyclical
Massive unemployment will shift the PPC to the left because labour force remains underutilized. The economy will produce inside the PPC indicating underutilization of resources.
Potential output is the capacity to produce should all factors be employed in an economy. For example, it is the output should there be no unemployment, no spare labour and no spare capital. It is unlikely that actual output will be the same as potential ouput since there is always unemployment.
Controlled.
You should produce mixed goods in a mixed economy.
Let's take a simpler approach here. Consider an economy with just one good in production: Cars. THe economy only produces cars and only employs people to produce cars. The demand for the car in that economy is 10.000 cars/year. And in order to produce 10.000 cars/ year, the economy has to employ 1000 people so 10 cars/person. For some weird reason, the demand for the cars decrease to 8000 cars/ year. Now, to produce 8000 cars, the economy only needs 800 people. Therefore, those 200 people are fired, creating unemployment. Aggregate demand works the same with the only different that it's the total demand of every single goods in an economy (cars,oils,house.... and thousands more). And so, if it falls, it needs less people to produce enough good to satisfy the demand => unemployment. Supply works in the same way if not simpler. Back to the car example, if for suddenly a factory blows up and forces the production to go down from 10.000 cars to 5.000 cars. Therefore, the economy employs 500 more employees than it needs to produce those cars. Thus, it creates unemployment where those 500 people are fired. In aggregate world, if the total (aggregate) supply falls, all those people who are on the "excess" level would be fired and become unemployed, thus generating unemployment rate.
Massive unemployment will shift the PPC to the left because labour force remains underutilized. The economy will produce inside the PPC indicating underutilization of resources.
Controlled.
Potential output is the capacity to produce should all factors be employed in an economy. For example, it is the output should there be no unemployment, no spare labour and no spare capital. It is unlikely that actual output will be the same as potential ouput since there is always unemployment.
You should produce mixed goods in a mixed economy.
You should produce mixed goods in a mixed economy.
Let's take a simpler approach here. Consider an economy with just one good in production: Cars. THe economy only produces cars and only employs people to produce cars. The demand for the car in that economy is 10.000 cars/year. And in order to produce 10.000 cars/ year, the economy has to employ 1000 people so 10 cars/person. For some weird reason, the demand for the cars decrease to 8000 cars/ year. Now, to produce 8000 cars, the economy only needs 800 people. Therefore, those 200 people are fired, creating unemployment. Aggregate demand works the same with the only different that it's the total demand of every single goods in an economy (cars,oils,house.... and thousands more). And so, if it falls, it needs less people to produce enough good to satisfy the demand => unemployment. Supply works in the same way if not simpler. Back to the car example, if for suddenly a factory blows up and forces the production to go down from 10.000 cars to 5.000 cars. Therefore, the economy employs 500 more employees than it needs to produce those cars. Thus, it creates unemployment where those 500 people are fired. In aggregate world, if the total (aggregate) supply falls, all those people who are on the "excess" level would be fired and become unemployed, thus generating unemployment rate.
It is the demand and supply which determines the goods and services to produce in the economy.
Controlled
In a {Traditional Economy}, economic decisions are based on customs handed down from generation to generation. In a {Market Economy} individuals make their own decisions about what to produce how to produce it & for whom to produce it.
china is centrally planned economy its means that all the things in china are occupies by china government. they will decide what to produce, where to produce, how to produce it also decides that in which quantity they has to produce the thing.
Free/market economy
Controlled.