ECONOMICS
FISCAL POLICY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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net leakage from the circular flow of income.
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net injection into the circular flow of income
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a leakage.
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an injection
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Detailed explanation-1: -The circular flow of income for a nation is said to be balanced when leakage equal injections. That is: The level of injections is the sum of government spending (G), exports (X), and investments (I). The level of leakage or withdrawals is the sum of taxation (T), imports (M), and savings (S).
Detailed explanation-2: -In the circular flow model, injections into the economy include investment, government purchases, and exports while leakages include savings, taxes, and imports.
Detailed explanation-3: -What is Circular Flow of Income? The circular flow means the unending flow of production of goods and services, income, and expenditure in an economy. It shows the redistribution of income in a circular manner between the production unit and households. These are land, labour, capital, and entrepreneurship.
Detailed explanation-4: -Expert-Verified Answer Government taxation is not an injection into the circular flow of national income. Injection means introduction of investment, government expenditure and exports. Whereas leakages comprise of taxes, savings and imports.