Chapter 10, Problem 3MCQ

To determine

The injected factor into the expanded circular-flow model.

Explanation of Solution

The circular-flow diagram represents the flow of money and the transactions of goods and services between firms and households. These transactions happen in the market for goods and services and factor markets.

In a circular-flow diagram, the flow of money into the market is equal to the flow of money out of the market. Government transfer payment represents the in-flow of money into the market which is considered an injection because it generates demand and income in the market. Thus, it is considered a leak-out in an economy.

Option “b” is correct.