Injections And Withdrawals Flashcards
1
Q
The impact of injections and withdrawals from the circular flow of income
A
-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.
-A withdrawal from the circular flow of income is money which leaves the economy. This can be from taxes, saving and imports.
-The economy reaches a state of equilibrium when the rate of withdrawals=the rate of injections.
-If there are net injections into the economy, there will be an expansion of national output.
-If there are net withdrawals from the economy, there will be a contraction of production, so output decreases.
