Using the Keynesian approach, if leakages from the spending stream are less than injections into the spending stream, total spending will be:
A) less than total output, and total output will decrease.
B) less than total output, and total spending will increase.
C) greater than total output, and total output will increase.
D) greater than total output, and total spending will decrease.

Question

Quizplus · Accepted Answer

In the Keynesian framework, if leakages (such as savings, taxes, and imports) are less than injections (such as investment, government spending, and exports), it means that more money is being added to the economy than is being taken out. This excess of injections over leakages leads to an increase in total spending, which in turn stimulates production and increases total output.

Using the Keynesian Approach, If Leakages from the Spending Stream