Discussion
What happens if the injections are less than the leakages at full employment level of national income ?
Answer: D
The result is a Deflationary Gap.
At the full-employment level of income, if injections (investment, government spending, exports) are less than leakages (saving, taxes, imports), aggregate demand falls short of full-employment output. The shortfall is the deflationary gap; income falls below full employment and unemployment results.
An inflationary gap is the opposite case, with injections exceeding leakages at full employment. Equilibrium requires injections to equal leakages. Hyper-inflation is extremely rapid inflation, not a result of deficient demand.
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