In order to have a stable economy, what is the necessary relationship between income and spending? What must then be the relationship between leakages and injections?
What will be an ideal response?
For a stable economy, businesses must sell all the output so that they are induced to produce the same amount again. This requires total spending to match total income (which equals the value of total output). For spending to match income, planned leakages must equal planned injections.
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The natural rate of unemployment includes
A) frictional and cyclical unemployment. B) frictional unemployment and structural unemployment. C) only cyclical unemployment. D) only unemployment due to layoffs and corporate downsizing.
In the figure above, D0 is the demand for labor curve. Imposing a minimum wage of $6 per hour will initially
A) increase employment from 20 to 40 million hours per year. B) increase employment from 30 to 40 million hours per year. C) decrease employment from 40 to 20 million hours per year. D) decrease employment from 30 to 20 million hours per year.
Open market purchase of government securities by the Fed increases the federal funds rate
Indicate whether the statement is true or false
If the wage rate increases and firms in a perfectly competitive industry are hiring labor, then
A. the firms will quit using labor. B. market supply will decrease. C. profits will increase. D. market price will decrease.