Circular Flow of income

Question 1

What are the injections and what do they do?

Answer 1

The injections are: EXPORTS (X), INVESTMENT (I) and GOVERNMENT SPENDING (G)
Injections are things that cause additional money to enter the economy and INCREASE the level of AGGREGATE DEMAND and SPENDING..

Question 2

What are the leakages and what do they do?

Answer 2

The leakages are: TAX (T), IMPORTS (M) and SAVINGS (S).

Leakages are things that cause money to leave the economy and they REDUCE the level of AGGREGATE DEMAND and SPENDING..

Question 3

If Leakages>Injections what happens to the economy?

Answer 3

The economy contracts

Question 4

If Injections>Leakages what happens to the economy?

Answer 4

It expands and there is economic growth