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JAMB Economics 2009 Question 27

Question 27

National Income

In the circular flow of income, an increase in savings causes

  1. A.an increase in imports
  2. B.a decrease in the income stream
  3. C.an increase in household consumption
  4. D.a decrease in exports
Show the answer and explanation

Answer: B (a decrease in the income stream)

Explanation

Savings are a leakage: money saved is not spent, so less flows around the economy.