2.4.2 - injections and withdrawals

Question 1

What are injections?

Answer 1

Injections are monetary, exogenous additons to the economy such as government spending, investment and exports

Question 2

Why are injections considered exogenous?

Answer 2

They are external additions to the economy that do not depend on the current income level

Question 3

How do firms invest in capital goods according to the model?

Answer 3

Firms invest in capital goods for future benefits, but the model only accounts for current income

Question 4

What influences government spending?

Answer 4

Political objectives and the amount of government borrowing

Question 5

What do exports relate to in the economy

Answer 5

Economy of foreign countries

Question 6

What are withdrawal in the context of the economy

Answer 6

Endogenous leakages of money, including taxation, savings and imports

Question 7

What happens if sum of injections is greater than sum of withdrawals

Answer 7

Economy will be growing

Question 8

What happens if sum of injections is less than sum of withdrawals

Answer 8

Economy will be shrinking

Question 9

What is macroeconomic equilibrium

Answer 9

Injections must be equal to withdrawlas, and thus the national income remains the same