Taxes are not considered a leakage because they become transfers in the circular flow of income and spending model.

If bonds and stocks are considered to be substitute goods, and the investors expect stock prices to drop in the near future, _____

a. the price of bonds will also decline b. the supply of bonds will increase c. the interest rate on bonds will decline d. the demand for stocks will increase e. the demand for bonds will decline

An increase in input costs in the production of electric automobiles caused the price of electric automobiles to rise. Holding everything else constant, how would this affect the market for gasoline-powered automobiles (a substitute for electric

automobiles)? A) The supply of gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease. B) The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would increase. C) The demand for gasoline-powered automobiles would decrease because consumers could afford to buy fewer gasoline-powered automobiles. D) The demand for gasoline-powered automobiles would increase and the equilibrium price of gasoline-powered automobiles would decrease.