ACCA Advanced Performance Management (APM) Practice Exam

An outward shift of the Production Possibility Frontier (PPF) illustrates economic growth. This shift signifies that an economy has increased its ability to produce goods and services. Various factors could contribute to this growth, including advancements in technology, increases in the quantity of resources available (such as labor and capital), or improvements in efficiency.

When the PPF shifts outwards, it indicates that the economy can produce more of one or both goods represented on the axes of the graph without any trade-offs, meaning that there is less of a scarcity constraint on resources. This increase in productive capacity allows for a greater output level, demonstrating an overall improvement in economic performance.

The other options do not align with the implications of an outward shift in the PPF. Economic decline would be reflected by an inward shift, a reduction in production capabilities would also lower the economy's potential output, and worsening resource allocation does not inherently relate to a change in the overall capacity to produce.