Here is one hypothesis: A well-funded social safety net can increase economic equality but will reduce economic output. Explain why this might be so, and sketch a production possibility curve that shows this trade off.

A well-funded social safety net is a system of government programs like unemployment benefits, healthcare, education, and other assistance, aiming to help individuals maintain a minimum standard of living. The hypothesis suggests that a well-funded social safety net can increase economic equality, but might decrease economic output. Thus, there is a trade-off between these two variables.

A well-funded social safety net can help redistribute wealth from the richer to the poorer segments of society, leading to less income inequality. This is achieved through progressive taxation, where richer people pay higher taxes relative to their income than poorer people. Additionally, a well-funded social safety net may also reduce incentives for individuals to work more or take on risky ventures, as they are already able to meet their basic needs. This could lead to less labor force participation and fewer startups, which may decrease overall economic output.

The production possibility curve (PPC) is a graphical representation that shows various combinations of two goods/services an economy can produce when resources are efficiently allocated. In this case, we will use the PPC to illustrate the trade-off between economic equality and economic output.

To sketch a PPC for this scenario: 1. Draw two axes at 90-degree angles to each other. Label the horizontal axis "Economic Output" and the vertical axis "Economic Equality." 2. Draw a downward-sloping, concave curve from the vertical axis to the horizontal axis. This shape reflects the trade-off between economic output and equality, wherein increasing equality through social safety nets might lead to a decrease in economic output. 3. Label the curve "PPC."

The downward-sloping nature of the curve indicates a negative relationship between economic equality and economic output. Any point on the curve shows the maximum attainable level of economic output for a given level of economic equality. Points inside the curve represent inefficient allocation of resources, whereas points outside the curve are unattainable with the current resources and technology. In conclusion, the hypothesis posits that a well-funded social safety net may increase economic equality but reduce economic output. This trade-off can be represented by a downward-sloping production possibility curve, illustrating the potential consequences of various levels of social safety net funding in an economy.