Question
Both injections into and withdrawals from the economy can affect the circular flow of income. An injection of new spending increases the flow. For example, if a new toy company opens, then hires workers from the surrounding area, this will increase the flow of wages and consumer spending. On the other hand, a withdrawal decreases the flow. If a car factory shuts down, workers lose their jobs and no longer have a steady source of income to continue to buy goods and services. Not all withdrawals are for negative reasons, however. Households may decide to reduce their spending to save money, which reduces the flow of income in an economy.
–“The Circular Flow of Income”
What are examples of injections into the circular flow of income? Check all that apply.
Most of the workers at a struggling paper company are laid off.
A bank gives its customers savings accounts to encourage saving.
A large media company that is on the rise gives most of its workers raises.
A supermarket chain expands into a number of different communities.
Sales during the holiday season encourage consumers to spend more than normal.
–“The Circular Flow of Income”
What are examples of injections into the circular flow of income? Check all that apply.
Most of the workers at a struggling paper company are laid off.
A bank gives its customers savings accounts to encourage saving.
A large media company that is on the rise gives most of its workers raises.
A supermarket chain expands into a number of different communities.
Sales during the holiday season encourage consumers to spend more than normal.
Answers
GPT-4o mini
Examples of injections into the circular flow of income from the provided options include:
- **A large media company that is on the rise gives most of its workers raises.** (Increased wages lead to higher consumer spending.)
- **A supermarket chain expands into a number of different communities.** (Expansion creates jobs and stimulates local economies.)
- **Sales during the holiday season encourage consumers to spend more than normal.** (Increased consumer spending is an injection into the economy.)
The first option (most of the workers at a struggling paper company are laid off) is a withdrawal, and the second option (a bank gives its customers savings accounts to encourage saving) does not directly inject money into the economy, as it focuses on savings rather than spending.
- **A large media company that is on the rise gives most of its workers raises.** (Increased wages lead to higher consumer spending.)
- **A supermarket chain expands into a number of different communities.** (Expansion creates jobs and stimulates local economies.)
- **Sales during the holiday season encourage consumers to spend more than normal.** (Increased consumer spending is an injection into the economy.)
The first option (most of the workers at a struggling paper company are laid off) is a withdrawal, and the second option (a bank gives its customers savings accounts to encourage saving) does not directly inject money into the economy, as it focuses on savings rather than spending.