Question

Which of the following is a list of only leakages from the spending stream? A. saving,...

Which of the following is a list of only leakages from the spending stream?

A. saving, taxes, and imports

B. Investments, government spending, and saving

C. Imports, exports, and investment

D. Taxes, consumption, and exports

  

Which of the following would be expected if leakages exceed injections?

A. Interest rates will being to rise

B. The economy will be at full employment without inflation

C. The economy’s output of goods and services will decline

D. There will be demand pull inflation'

  

An unwanted increase in inventories is a signal that:

A. the multiplier effect is not working

B. cyclical unemployment is falling

C. aggregate demand has declined

D. demand pull inflation exists

Business   Economics   
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Homework Answers

Answer #1

1. A. saving, taxes, and imports

Leakage cause a contraction in the process of production in the economy. It includes savings of public, taxes paid to government and imports of a country.

2. C. The economy’s output of goods and services will decline

Increase in leakage means more money is went out from the business cycle so output of economy declines.

3. C. aggregate demand has declined

If Y > AD than there will be unplanned inventory investment which means stock of unsold goods increases as a result of firms will produce less output in subsequent period.

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