The economy will contract (shrink)if
A)leakages exceed injections
B)injections exceed leakages
C)injections equal leakages
D)expenditures exceed output
E)investment exceeds saving

Question

Quizplus · Accepted Answer

If leakages (savings, taxes, and imports) exceed injections (investment, government spending, and exports), there will be a decrease in aggregate demand, which will lead to a contraction in the economy. This happens because there is less spending in the economy, resulting in less production, output, and employment.

The Economy Will Contract (Shrink)if