IB Economics SL 1.1.4 Production possibilities curve model Question Bank

Study the extract and data below and answer the questions that follow.
Singapore

(1) Singapore is a high-income economy in South-East Asia. The country provides the world's most business-friendly regulatory environment for local entrepreneurs and is ranked among the world's most competitive economies. Presently, the strong manufacturing and services sectors have become the main drivers of the Singapore economy. There is a wide range of businesses, with a particular focus on high value added goods and services.
Timor-Leste (East Timor)

(2) Timor-Leste (formerly known as East Timor) is a developing economy in South-East Asia. Timor-Leste gained independence from Indonesia in 2002. The country and families were torn apart by violence in the years before independence. Nearly 70 % of all buildings, homes and schools were destroyed. An estimated 75 % of the population were forced to move due to the violence.

(3) After serious challenges, Timor-Leste has progressed, particularly due to its endowment of natural resources, especially oil. With the petroleum revenue boom, fiscal policy has been expansionary and the economy has grown rapidly as a result of government spending, focusing on major infrastructure, development of skills, and other institutional changes. A main goal was to generate increased and sustainable private sector investment as a means to increased job opportunities and to reduce poverty. These developments are starting to contribute to poverty reduction and improved social outcomes.

Using a production possibilities curve (PPC) diagram, explain the effects of the violence in Timor-Leste on production possibilities (potential output) (paragraph (2)).