Suppose a country is currently operating at full employment on its production possibilities curve. If this production possibilities curve has capital on the X axis and consumption on the Yaxis, if the country decides to increase capital purchases: In the short-run, consumption expenditures will have to be reduced but in the long-run the production possibilities curve will shift outward In the short-run, consumption expenditures will increase as the increased capital increases household consumer spending In the short-run, consumption expenditures will have to be reduced but in the long-run, the production possibilities curve will decrease because of the decline in consumer spending The increase in capital expenditures will cause a decline in consumption expenditures and cause output to fall below the production possibilities curve