The sum of leakages from the income flow must equal the sum of injections into the income flow.

Question

Quizplus · Accepted Answer

In the context of the circular flow of income model, leakages (such as savings, taxes, and imports) from the income flow must equal the injections (such as investment, government spending, and exports) into the income flow to maintain equilibrium in the economy. This balance ensures that all income is either spent or re-injected into the economy, keeping the overall economic activity stable.

The Sum of Leakages from the Income Flow Must Equal