Question

Both injections into and withdrawals out of 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 and 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 withdrawals from the circular

flow of income? Check all that apply.

A sharp increase in taxes affects many middle-class

families.

A sports-apparel company cuts jobs as a result of

slow sales.

A fast-food chain goes out of business and shuts

down all of its restaurants.

Most of the stores at a mall are promoting sales to

encourage new customers.

O Crew members are hired for a movie company that

is shooting on location.

Answer 1

Examples of withdrawals from the circular flow of income include a sharp increase in taxes, job cuts by a company, and a business shutting down, all of which reduce economic activity and aggregate demand.

Step-by-step explanation:

Withdrawals from the circular flow of income refer to any instances where money leaves the circular flow, thus reducing the overall economic activity. These withdrawals can take various forms, leading to a contraction in economic activity. Examples of such withdrawals include:

• A sharp increase in taxes affects many middle-class families.
• A sports apparel company cuts jobs as a result of slow sales.
• A fast-food chain goes out of business and shuts down all of its restaurants.

It is important to note that while not all withdrawals are inherently negative, such as saving, they still reduce the flow of income and can affect the aggregate demand within an economy.