If, using the Keynesian approach, injections into the spending stream were $1.2 trillion and leakages from the spending stream were $1.4 trillion:
A) total output would be $1.2 trillion.
B) total output would be $2.6 trillion.
C) business inventories would increase by $0.2 trillion.
D) business inventories would decrease by $0.2 trillion.

Question

Quizplus · Accepted Answer

In the Keynesian approach, if leakages (savings, taxes, imports) exceed injections (investment, government spending, exports), it means that not all output is being purchased. This leads to an increase in business inventories because goods produced are not being sold, hence the increase by $0.2 trillion (the difference between injections and leakages).

If, Using the Keynesian Approach, Injections into the Spending Stream