Injection and withdrawals 2..4.2

• what does the circular flow suggest?

  as long as households keep spending what they earn, firms use their revenues to produce more goods using same inputs won't change
• How is the circular flow of income affected?

  by injections/withdrawals (leakages)
• what are injections?

  monetary additions to the economy

  government spending (G), investment (I) exports (X)
• what are withdrawals?

  money is removed from the economy

  taxes (T) savings (S) imports (M)
• when is the economy in equilibrium?

  when injections and withdrawals are equal
• what happens when injections are greater than withdrawals?

  expenditure > output- firms increase output so national output, income and expenditure increase
• what happens if withdrawals greater than injections?

  output >expenditure so firms reduce output- national output, income and expenditure decreases
• injections and withdrawals