Because financial markets clear,we know that leakages in the economy will equal injections and,therefore,there will be enough spending in the economy to purchase whatever amount of output level produced.

Question

Quizplus · Accepted Answer

This is true according to the circular flow model of the economy. Leakages (savings, taxes, and imports) are balanced by injections (investment, government spending, and exports) in a closed economy, ensuring that there is enough demand to purchase the output produced. As a result, the economy will reach equilibrium, where aggregate demand equals aggregate supply, and there will be no unintended inventories or shortages.

Because Financial Markets Clear,we Know That Leakages in the Economy