2.4.2 Injection and withdrawals

Question 1

Impact of injections into the circular flow of income

Answer 1

An injection into the circular flow of income is money which enters the economy. This is in the form of government spending, investment and exports.
- If there are net injections into the economy, there will be an expansion of national output.

Question 2

Impact of withdrawals from circular flow of income

Answer 2

An withdrawal from the circular flow of income is money which leaves the economy. This can be from taxes, saving and imports.
- If there are net withdrawals from the economy, there will be a contraction of production, so output decreases.

Question 3

Economy Equilibrium

Answer 3

The economy reaches a state of equilibrium when the rate of withdrawals = the rate of injections.