Suppose for an economy, investment = $40;saving = $50, government spending + exports = 100;and taxes + imports = $110.Then for this economy, total leakages exceed total injections by $20, so there will be pressure for the economy to contract.

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Quizplus · Accepted Answer

The total leakages in this economy are equal to $110 ($50 in savings and $60 in taxes and imports), while the total injections are equal to $100 ($40 in investment and $60 in government spending and exports). Therefore, there is a leakage-injection gap of $10. The statement that the gap is $20 is incorrect. A leakage-injection gap represents the difference between the total amount of income leakages (savings, taxes, and imports) and the total amount of income injections (investment, government spending, and exports) in an economy. A positive gap indicates that the leakages exceed the injections, and this puts pressure on the economy to contract.

Suppose for an Economy, Investment = $40;saving = $50, Government