The figure given below represents the leakages and injections in an economy.?Figure 10.3??In the figure:?S₁ and S₂: Saving functions?I: Investment?G: Government spending?EX: Net exports

-Refer to Figure 10.3. If saving is represented by S₁, at a real GDP level of $500:

Question

The figure given below represents the leakages and injections in an economy.?Figure 10.3??In the figure:?S₁ and S₂: Saving functions?I: Investment?G: Government spending?EX: Net exports
 
-Refer to Figure 10.3. If saving is represented by S₁, at a real GDP level of $500:

Quizplus · Accepted Answer

At a real GDP level of $500, the level of injections (I + G + EX) is less than the level of leakages (S₁), indicated by the point on the Saving function being higher than the point on the aggregate injections line. This means that there is a leak in the circular flow of income, which causes income to decrease. Thus, the correct answer is (B) leakages are greater than injections which will cause income to decrease.

The Figure Given Below Represents the Leakages and Injections in an Economy.?Figure