The Figure Given Below Represents the Leakages and Injections in an Economy

question 94

Multiple Choice

The figure given below represents the leakages and injections in an economy. Figure 10.3 In the figure:
S₁ and S₂: Saving functions
I: Investment
G: Government spending
EX: Net exports
In Figure 10.3, which of the following represents the paradox of thrift?

• A)A shift of the saving curve from S₂ to S₁.
• B)A shift of the saving curve from S₁ to S₂.
• C)A change in equilibrium from e₂ to e₁.
• D)A change in equilibrium real GDP from $300 to $400.
• E)A change in equilibrium real GDP from $100 to $400.

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Definitions:

Federal Reserve System

The primary financial institution in the United States tasked with managing monetary policy, overseeing financial organizations, and ensuring the financial system remains stable.

Banks

Financial institutions that accept deposits, offer loans, and provide other financial services.

Financial Institutions

Organizations that provide financial services, such as banks, insurance companies, and stock exchanges.

Open Market Operations

The buying and selling of government securities by a central bank as a means of controlling the money supply and influencing interest rates.