If leakages are less than injections,equilibrium output will be
A)Less than full-employment output,and a recessionary gap will occur.
B)More than full-employment output,and a recessionary gap will occur.
C)Less than full-employment output,and an inflationary gap will occur.
D)More than full-employment output,and an inflationary gap will occur.

Question

Quizplus · Accepted Answer

When leakages (such as savings, taxes, and imports) are less than injections (such as investment, government spending, and exports) into the economy, it indicates that there is more spending than saving. This leads to an increase in demand, which can push the economy beyond its full-employment output, creating an inflationary gap.

If Leakages Are Less Than Injections,equilibrium Output Will Be