Circular flow model and the equilibrium condition

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Reference no: EM1378448

Question1. In the circular flow model of the economy, what are the "leakages?" Define them.

Question2. In the circular flow model of the economy, what are the "injections?" Define them.

Question3. Explain why the leakages must equal the injections for the economy to be at equilibrium.

Question4. When looking at the circular flow model and the equilibrium condition of leakages equaling injections, what would be the effect on the economy if the following were true:

a. Investment spending = $2 billion

b. Government spending = $8 billion.

c. Taxes = $3 billion.

d. Savings = negative $2 billion

e. Imports = $12 billion

f. Exports = $1 billion

Reference no: EM1378448

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