Economics (AS & A Level) · Oct / Nov 2025 · Paper 13 · Question 19

A government is planning to increase its expenditure on defence. Half of this expenditure will be on equipment such as planes and weapons which it will have to import as it does not produce this equipment domestically. What is the initial impact on injections and leakages from the circular flow of income?

1. AThe initial rise in injections is greater than the initial rise in leakages.
2. BThe initial rise in injections is greater than the initial fall in leakages.
3. CThe initial rise in injections is smaller than the initial rise in leakages.
4. DThe initial rise in injections is smaller than the initial fall in leakages.

As printed in the paper