Figure 1- 2 With a budget of $500 000,a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination)for use in classrooms.

-If some income earned by households is not spent on output,or if some income earned by firms is not spent on factor services,the circular flow of income will
A)contract.
B)explode.
C)stop.
D)expand.
E)run over.

Question

Figure 1- 2 With a budget of $500 000,a school board can choose to purchase 20 000 textbooks or 2000 laptop computers (or some intermediate combination)for use in classrooms.
 
-If some income earned by households is not spent on output,or if some income earned by firms is not spent on factor services,the circular flow of income will
A)contract. 
B)explode. 
C)stop. 
D)expand. 
E)run over.

Quizplus · Accepted Answer

If income is not spent, it leads to leakages in the circular flow, causing a contraction in economic activity.

Figure 1- 2 with a Budget of $500 000,a School