Answer to Question #74149 in Macroeconomics for maureen Haatimba
a) What is the equilibrium output? b) What is the level of saving in this economy; clearly show how it’s calculated. c) What is the relationship of saving and investment? d) What is a leakage from the circular flow of income? e) Why is investment spending viewed as an injection into the circular flow of income? 10 marks
B) Level of saving in this economy = (K108000 – K101000) = K7000
C) Saving and investment are equal only in equilibrium; they are unequal under
conditions of disequilibrium.
D) In a closed circular income stream, money flows continuously from firms to
households. Households spend all of their money on goods and businesses spend
all of their money on labor and expansion. The basic model of the circular flow of
income ignores common consumer actions that take money out of the circular of
income, or leakage. For instance, most households save money and some
companies retain earnings.
E) The circular flow will adjust following new injections into it or new withdrawals
from it. An injection of new spending will increase the flow. A net injection relates
to the overall effect of injections in relation to withdrawals following a change in
an economic variable.
Need a fast expert's response?Submit order
and get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!