FIGURE 1 SHORT-RUN VERSUS LONG-RUN GROWTH ILLUSTRATED ON PPF DIAGRAMS
Short-run economic growth occurs when underutilized resources are placed into production. In a PPF diagram, this is shown as a movement from a point inside the PPF to a point closer to or on the PPF (such as from a to b). Long-run economic growth occurs when new resources are found or existing resources are used more efficiently, thus expanding an economy’s capacity to produce. In this case, PPFA expands outward to PPFB, allowing for more production possibilities.