According to the Keynesian approach, if leakages from the spending stream exceed injections:
A) business inventories will decrease and the level of economic activity will increase.
B) business inventories will remain unchanged and the level of unemployment will decrease.
C) unplanned business inventories will accumulate and the level of economic activity will decrease.
D) unplanned business inventories will accumulate as the economy moves toward full employment.

Question

Quizplus · Accepted Answer

In the Keynesian framework, if leakages (such as savings, taxes, and imports) exceed injections (such as investment, government spending, and exports), it means that not all income is being recycled back into the economy through spending. This leads to a decrease in demand, causing businesses to sell less than expected. As a result, unplanned inventories accumulate, and businesses respond by reducing production, which in turn decreases the level of economic activity.

According to the Keynesian Approach, If Leakages from the Spending