Which of the following will cause the economy to contract?
A) if leakages exceed injections
B) if injections exceed leakages
C) if expenditures exceed output
D) if investment exceeds saving

Question

Which of the following will cause the economy to contract?  
A) if leakages exceed injections 
B) if injections exceed leakages 
C) if expenditures exceed output 
D) if investment exceeds saving

Quizplus · Accepted Answer

When leakages (saving, taxes, and imports) exceed injections (investment, government spending, and exports), there is a decrease in demand and a reduction in output, leading to a contraction of the economy.

Which of the Following Will Cause the Economy to Contract