What are the injections and withdrawals?

The circular flow of income for a nation is said to be balanced when withdrawals equal injections. That is: The level of injections is the sum of government spending (G), exports (X), and investments (I). The level of leakage or withdrawals is the sum of taxation (T), imports (M), and savings (S).

What happens when injections are equal to withdrawals?

When total injections equal total withdrawals, the level of national income will remain constant, and the economy will be in general equilibrium. The level of economic activity will change following a change in either injections or withdrawals.

What is meant by withdrawals and injections How do they affect the size of circular flow of income and expenditure in an economy?

Leakages reduce the flow of income. Injection means the introduction of income into the flow. When households and firms borrow savings, they constitute injections. Injections increase the flow of income.

Is saving an injection or withdrawal?

Savings and investment Marginal decisions to save reduce the flow of income in the economy because saving is a withdrawal out of the circular flow. However, firms also purchase capital goods, such as machinery, from other firms, and this spending is an injection into the circular flow.

What is withdrawals from an injection into the national income?

Withdrawals consist of net saving, net taxes and import expenditure. On the other hand, injections comprises investment, government expenditure and export expenditure. The rise of injections will lead to a rise of the GDP and the value of the multiplier will increase.

What is the difference between leakages and injections?

Injections are the introduction of income into the flow, such as additions to investment, government expenditure and exports. Leakages are the withdrawal of income from the flow, such as savings, taxation and imports.

How does an injection affect the circular flow of income?

This is money entering the economy. When injections are greater than withdrawals the amount of money in the circular flow increases, resulting in economic growth.

What will happen if leakage is greater than injection?

If leakages exceed injections, then total output exceeds total spending and the level of national output (GDP) will fall. If injections exceeds leakages, then total spending exceeds total output and the level of national output will rise. Equilibrium may be reached at a level of GDP in which there is unemployment.

How do you calculate withdrawal level?

Withdrawal rate is calculated by taking the amount of funds withdrawn per year and dividing it by the size of the entire portfolio. It is typically expressed as a percentage.

What is the significance of higher injections than withdrawals?

When injections are greater than withdrawals the amount of money in the circular flow increases, representing economic growth. When injections are less than withdrawals the amount of money in the circular flow decreases, representing a fall in real GDP.

When injection is more than withdrawal?

What is the difference between leakage and injection?