2.4.2 Injections and withdrawals

Question 1

What is an injection?

Answer 1

This is when money is placed into the economy

Question 2

What are withdrawals?

Answer 2

This is when money is taken out of the economy.

Question 3

Name some examples of injections into the economy.

Answer 3

Government expenditure, investment and exports.

Question 4

Name some examples of withdrawals into the economy.

Answer 4

Savings, taxes and imports

Question 5

Draw a circular flow of income

Answer 5

Page 134 in your theme 2 booklet to see if you’re right.

Question 6

What will an increase in VAT do to the circular flow of income?

Answer 6

It will decrease it.

Question 7

What will happen to the circular flow of income if tax breaks are given to new start-up businesses?

Answer 7

This will increase the circular flow of income.

Question 8

What happens to the circular flow of income if interest rates are cut?

Answer 8

Circular flow of income will increase as it’s cheaper to borrow.