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27 June, 10:32

In the circular flow of income, Keynesian equilibrium obtains when a) All the individual sectors are in equilibrium: S=I, T=G, M=X b) The aggregate injections equal aggregate withdrawals S+T+M = I+G+X c) There is no inflation or unemployment d) The interest rate and exchange rate are at their market clearing levels

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  1. 27 June, 10:56
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    The answer is B:

    The aggregate injections equal aggregate withdrawals S+T+M = I+G+X.

    Explanation:

    In the circular flow of income, Keynesian equilibrium obtains when The aggregate injections equal aggregate withdrawals S+T+M = I+G+X.

    Where S = Saving

    T = Taxes

    Imports = (M)

    I = Investments

    G = Government spending

    X = Exports

    An equilibrium is approached when there is a balance between the savings, taxes and imports and investments, government spendings and exports.
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