The critical issue of macro instability,when there is no government intervention and no foreign trade,is whether
A)spending injections will equal spending leakage at full employment.
B)Savings and taxes will be equal.
C)Investment and consumption will exceed disposable income.
D)Consumption and savings lead to the ideal interest rate.

Question

Quizplus · Accepted Answer

In the absence of government intervention and foreign trade, the critical issue is whether spending injections (investment, government spending, and exports) will equal spending leakage (savings, taxes, and imports) at full employment. If injections are greater than leakages, it will lead to inflation and if leakages are greater than injections, it will lead to unemployment. Therefore, the equality of injections and leakages is necessary for macro stability. Hence, option A is the correct choice.

The Critical Issue of Macro Instability,when There Is No Government