Question

5 points The Chinese government decides to inject $25.000.000 in the economy due to the coronavirus pandemic in the healthcare sector. The economy's leakage or savings from the injection is $2.500.000 Based on this information what is the impact of government spending ..$250,000,000 b. 525.000.000 25.000 d. Cannot be calculated from here

Answer 1

Injection means introduction of income into the flow. When households and firms borrow savings, they constitute injections. Injections increase the flow of income. Injections can take the forms of investment, government spending and exports. As long as leakages are equal to injections, the circular flow of income continues indefinitely. Financial institutions or capital market play the role of intermediaries. This means that income individuals receive from businesses and the goods and services that are sold to them do not count as injections or leakages, as no new money is being introduced to the flow and no money is being taken out of the flow.

The injection provided by the government sector is Government spending (G) that provides collective services and welfare payments to the community.

In the above example chinese government injects $ 25,000,000 . In other words, government spending is done by $ 25,000,000 .

So (B) is a correct answer