M MResearch on the Mechanisms and Effects of Artificial Intelligence in Expanding the Production Possibility Frontier in Finance

Abstract

Building on the production possibility frontier (PPF) theory from economics, this paper develops a theoretical framework to analyze how artificial intelligence (AI) is transforming the financial sector. The study proposes that AI systematically shifts the financial PPF outward through four key mechanisms: activating data as a production factor, improving technological efficiency, restructuring service models, and optimizing risk management. In practice, this shift leads to revolutionary improvements in supply efficiency, broader and more inclusive financial services, more precise risk control, and varied innovation in financial products. At the same time, the paper also examines challenges such as algorithmic bias and black-box decision-making, emphasizing that technology, ethics, and regulation form new constraints on the expansion of the frontier. This research provides a new theoretical perspective for understanding the nature and development of financial technology.