Equilibrium within the circular flow of income materializes when ?
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Answer: A. Injections = withdrawals
Explanation
Circular flow equilibrium occurs when total economic injections equal total withdrawals. Leakages from the income stream must be offset by spending injections to maintain stability. Saving taxes and imports must balance investment government spending and export injections. Injections include investment government purchases and exports entering the circular flow. Withdrawals consist of savings taxes and import spending leaking out of the economy. Disequilibrium leads to national income expansion or contraction over business cycles.
Macroeconomic forecasting models track injection and withdrawal flows to predict GDP changes. Fiscal policy injections aim to offset economic withdrawals during recessionary periods. International trade imbalances affect the circular flow by altering export and import leaks. Option B refers to a public holiday which has no bearing on macroeconomic income flows. Option C implies an inequality between injections and withdrawals disrupting equilibrium. Option D is incorrect because the correct equilibrium condition is explicitly stated in A.
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