2.4.2 Injections and withdrawals

• Define national output

  The value of the flow of goods and services from firms to households
• Define national expenditure

  The value of spending households on goods and services
• Define national income

  The value of income paid by firms to households in return for land, labour and capital
• Examples of national output

  households: land, labour and capital

  firms: goods and services
• Examples of what is spent of national income

  -Rent

  -Wages

  -Interest

  -Profit
• Injections into the circular flow

  -Investment

  -Government Spending

  -Exports
• Withdrawals into the circular flow

  -Savings

  -Taxes

  -Imports
• Relationship between injections and withdrawals

  -When injections exceed withdrawals, there is an increase in national income, leading to economic growth (greater spending)

  
  

  -When withdrawals exceed injections, there is a decrease in national income, potentially leading to economic contraction (less spending)
• Define Injection

  Injections add money into the circular flow of income and increase its size
• Define Withdrawals

  Withdrawals or leakages remove money from the circular flow of income and reduce its size