Which of the following is true of leakages and injections in the circular flow model?
A)Leakages minus injections equal gross domestic product (GDP).
B)Injections minus leakages equal gross domestic product (GDP).
C)Leakages minus injections equal zero in equilibrium.
D)Leakages must be less than injections for an economy to be in equilibrium.
E)Leakages must be greater than injections for an economy to be growing.

Question

Quizplus · Accepted Answer

In the circular flow model, leakages (savings, taxes, and imports) represent money flowing out of the economy, while injections (investment, government spending, and exports) represent money flowing into the economy. In equilibrium, leakages are equal to injections, so their difference is zero. Therefore, option C is correct. Option A and B are incorrect as GDP is not directly related to leakages and injections. Option D and E are also incorrect as they do not accurately represent the relationship between leakages and injections in the circular flow model.

Which of the Following Is True of Leakages and Injections