Circular Flow of Income

• Leakages

  Money flowing out of the economy

  savings, taxations and payment for imports
• Injections

  flowing into the economy

  Investment, Government Expenditure and Export Payments
• Equilibrium

  leakages must equal injections

  S+T+M=I+G+X
• 3 sectors under household and firms

  financial, government, overseas
• Taxes Increase fro Companies

  leakage

  output decreases

  come decreases

  spending decreases

  contraction in the economy