The leakage and injections approach implies that a government deficit is financed by

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The leakage and injections approach states that a government deficit is financed by private investment less private saving plus net exports. This is because the deficit creates an injection of funds into the economy that must be financed by a corresponding decrease in private saving, increase in private investment, or increase in net exports (which can also be seen as a decrease in imports). Option A is the opposite of the correct answer, and option C is not always true as the trade deficit can be balanced or even in surplus despite a government deficit. Option D is incorrect as there is a correct answer.

The Leakage and Injections Approach Implies That a Government Deficit