Question

Draw a relationship between leakages and injections in circular flow

Answer 1

When households and firms borrow the savings, they constitute injections. Injectionsincrease the flow of income.Injections can take the forms ofinvestment, government spending and exports. As long asleakages are equal to injections, the circular flow of income continues indefinitely.

Injections into the economy include investment, government purchases and exports while leakages include savings, taxes and imports. Savings leaks out to borrowers as it goes through the banking system, and borrowers use the money to buy goods and services, which then injects the money back into thecircular flow

Answer 2

Leakages lessen the stream of income. Injection indicates the initiation of revenue into the flow. When homes and organization acquire the profits, they establish injections. Till the time leakages are similar to injections, the annular flow of revenue remains momentarily. Injections into the marketplace constitute expenditure, administration investments, and commodities while leakages include profits, prices, and imports. Savings flows out to the consumers as it goes within the business system, and borrowers utilize the capital to purchase goods and assistance, which then injects the capital back into the circular flow.