Asked by Michal Basovich on Apr 24, 2024
Verified
Which of the following correctly illustrates the leakages-injections approach to GDP?
A) DI + (NT) = C + I + G + (X ‒ M)
B) S + C + NT = DI
C) S + C + (NT) = I + G + (X ‒ M)
D) S + (NT) + M = I + G + X
E) S + (NT) = I + G + (X ‒ M)
Leakages-Injections Approach
An economic understanding and analysis of how savings, taxes, and imports (leakages) offset government spending, investments, and exports (injections) in the circular flow of income.
- Compare and contrast injections and leakages in the context of the circular flow model and assess their impact on GDP.
Verified Answer
SN
Sheena Nelson6 days ago
Final Answer :
D
Explanation :
The leakages-injections approach to GDP considers leakages (savings, taxes, and imports) and injections (investment, government spending, and exports) into the economy. Option D correctly matches leakages (S + NT + M) with injections (I + G + X), illustrating the balance between the two for an economy to be in equilibrium.
Learning Objectives
- Compare and contrast injections and leakages in the context of the circular flow model and assess their impact on GDP.