List the withdrawals and injections to the circular flow.

Expert Solution

WITHDRAWALS TO THE CIRCULAR FLOWS IN THE FOAM OF : 1. Savings (S) 2. Imports (M) 3. Taxation (T) INJECTIONS TO THE CIRCULAR FLOW IN THE FOAM OF: 1. Investment (I) 2. Exports (X) 3. Government expenditure / spendings

Injection refers to introduction of money in circular flow. Eg. Investment, exports, government spendings. If there is increase in government expenditure and investment=> demand for good produced increases => rise in the level of output/ income in economy => flow of income increases => expansion of circular flow.

WITHDRAWALS Or LEAKAGES refers to the withdraw of money from circular flow. Eg. Savings imports , taxation. If household saves a part of their income => demand for good produced decrease => fall in the level of output/ income in economy => flow of income decreases => contraction of circular flow.

LEAKAGES = INJECTIONS = CIRCULAR FLOW OF INCOME REMAINS STABLE

Rahul Sunny answered 2 years ago

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