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Injections it means the addition or introduction of income to the circular flow of an economy This increases aggregate demand, leading firms to raise production, hire more workers, and increase wages. Injections into the circular flow of income are a result of money borrowed by households and firms from different external sources, like financial institutions
However, this additional income does not result in an immediate expenditure More money enters the circular flow through investment, government spending, or exports than is withdrawn via savings, taxes, or imports Therefore, injections increase the flow of income in an economy.
The concepts of injections and withdrawals (also known as leakages) are integral to understanding the circular flow of income model
They influence the level of economic activity and determine the overall equilibrium in an economy. Leakage is an economic term that describes capital or income that escapes an economy or system in the context of a circular flow of income model It results in a gap between supply and demand. These include savings, taxes, and imports
Leakages reduce the total income available for spending on domestically produced goods and services, potentially leading to a decrease in overall economic activity if not offset by injections. Learn all about injections and withdrawals into the circular flow for a level economics including the effects of changes and the determinants of saving When injections exceed leakages, the economy experiences expansion
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