Answer to Question #58427 in Macroeconomics for orianthi

Question

In each of the following cases, specify whether the change is an injection or leakage/withdrawal in
Jamaica’s circular flow of income? In each case also specify whether the change is an increase or
a decrease assuming ceteris paribus condition.
a. The government raises tax allowance - circular flow of income will decrease.
b. The government cuts spending on roads - circular flow of income will decrease.ase.

Answer 1

a. The government raises tax allowance - circular flow of income will decrease.
b. The government cuts spending on roads - circular flow of income will decrease.
c. Firms borrow more money in order to build-up their stocks in preparation for an anticipated rise
in consumer demand - circular flow of income will increase.