Suppose that, in a $10 trillion economy, households spend $6 trillion and $4 trillion is leaked from the economy. If the injections total less than $4 trillion,
A) there will be an intentional decrease in inventories causing the economy to contract.
B) there will be an unintentional increase in inventories causing the economy to expand.
C) there will be an unintentional increase in inventories causing the economy to contract.
D) there will be an unintentional decrease in inventories causing the economy to expand.

Question

Quizplus · Accepted Answer

In this scenario, if injections are less than the $4 trillion that is leaked from the economy, it means that the total spending in the economy is less than what businesses anticipated. As a result, businesses end up with more goods than they can sell, leading to an unintentional increase in inventories. This situation typically signals that the economy is contracting because the demand for goods and services is less than the supply.

Suppose That, in a $10 Trillion Economy, Households Spend $6