Showing consumption as well as investment expenditures

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Use a simple circular flow diagram (closed, private model) to explain how GDP may be measured by Income (showing the factors and their corresponding incomes in the factor markets) as well as Expenditures, showing consumption as well as Investment expenditures. Explain how leakage (savings) must equal injection (investments) to maintain the balance in the circular flow, and how expenditures being less than income causes the circular flow to contract (Paradox of Thrift)

Reference no: EM131424791

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