What happens to the size of the income flow when leakages are larger than injections and injections are larger than leakages?

What happens to the size of the income flow when leakages are larger than injections and injections are larger than leakages?

The flow will be balanced and therefore in equilibrium when the injections are equal to the leakages. If the leakages are greater than the injections then national income will fall, while if injections are greater than leakages national income will rise.

How is the impact of leakages different from that of injections?

Injections and leakages Injections are the introduction of income into the flow, such as additions to investment, government expenditure and exports. Leakages are the withdrawal of income from the flow, such as savings, taxation and imports.

Do leakages always equal injections?

Injections must equal leakages because the amount of money coming into a sector of the economy must equal the amount of money that leaves that sector. There are also other sources of income, called “injections” and other ways that money can be spent, called “leakages.” There are three kinds of injections.

When the level of injections to the level of leakages then the?

If leakages match injections, then the volume of the core circular flow does not change. This is the same as achieving a balance between the water flowing form a faucet into a sink and that flowing out through the drain. When these two flows are equal, then the total amount of water IN the sink does not change.

How do leakages affect the economy?

Non-consumption uses of income—savings, taxes, and imports—are “leaked” out of the main flow. This reduces the money available throughout the rest of the economy.

How are leakages affecting the circular flow?

Leakage means withdrawal from the flow. When households and firms save part of their incomes it constitutes leakage. They may be in form of savings, tax payments, and imports. Leakages reduce the flow of income.

Why are leakages and injections important?

Leakages and injections have a great influence on economic activity, as they basically are economic activity. Without leakages and injections there would be no circular flow, without which the economy would run as it does now.

Why withdrawals and injections are not equal?

When injections do not equal withdrawals, then, there is disequilibrium in the economy. Withdrawals consist of net saving, net taxes and import expenditure. On the other hand, injections comprises investment, government expenditure and export expenditure.

What are the leakages from an injections into the circular flow How are leakages and injections related in the circular flow?

The leakages from the circular flow are taxes, savings, and import expenditures. The injections into the circular flow are investments, government expenditure, and export expenditures. Leakages represent income outflow, while injections relate to increases in income.

What does leakage affect mean?

From Wikipedia, the free encyclopedia. In the study of tourism, the leakage is the way in which revenue generated by tourism is lost to other countries’ economies. Leakage may be so significant in some developing countries that it partially neutralizes the money generated by tourism.

What are leakages examples?

For example, in the Keynesian depiction of the circular flow of income and expenditure, leakages are the non-consumption uses of income, including saving, taxes, and imports. Savings, taxes, and imports are “leaked” out of the main flow, reducing the money available in the rest of the economy.