If leakages exceed injections,
A)The economy will stabilize at full employment.
B)Interest rates will rise.
C)The economy is contracting.
D)Microeconomic instability will persist.

Question

Quizplus · Accepted Answer

When leakages (saving, taxes, and imports) exceed injections (investment, government spending, and exports), the economy is contracting as there is not enough aggregate demand to support production and employment. This leads to reduced output, rising unemployment, and a decline in economic activity.

If Leakages Exceed Injections