The figure given below represents the leakages and injections in an economy Figu

Question

The figure given below represents the leakages and injections in an economy Figure 10.2 Leakages and Injections (dollars) S+T+M 50 40 30 20 10 HGHEX -10 -20 30 00 400 500 600 700 800 Real GDP (dollars) In the figure: I, 1: Investment; G: Government spending EX, EX: Exports; T: Taxes; and M: Imports According to Figure 10.2, real GDP of $200 indicates a point where: O consumers engage in dissaving. O unplanned inventory changes will be positive. Ototal leakages exceed total injections the economy is in macroeconomic equilibrium. aggregate expenditures exceed total output.

Explanation / Answer

a) When the real GDP is at $200 billion the economy is dissaving where the consumption is more and saving is less. The answer is "A".

b) "E"

Point E represents the underutilization of the resources. ITs the point which is below the PPF. Any point below the PPF will be considered as an underutilization point.

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