True or false: The government sector is both a source of injections and leakages.True false question.TrueFalse

Answer

True.

In economic terms, the government sector plays a dual role in the circular flow of income, acting as both a source of injections and leakages.

1. Injections: These are additions to the economy that stimulate spending and investment. Examples include government spending on public services, infrastructure projects, and welfare programs. These expenditures can create jobs and increase overall demand in the economy.

2. Leakages: On the other hand, leakages refer to the withdrawal of money from the economy. In the context of the government sector, this can occur through taxation where the government collects money from households and businesses. This removes funds that could have been spent in the economy, thus reducing aggregate demand.

Therefore, it is accurate to say that the government sector is a source of both injections and leakages, making the statement true.