What are leakages and injections?

Leakages reduce the flow of income. Injection means introduction of income into the flow. Injections increase the flow of income. Injections can take the forms of investment, government spending and exports. As long as leakages are equal to injections, the circular flow of income continues indefinitely.

Click to read full answer. Regarding this, what is leakages and injections in economics?

Injections and Leakages Injections into the economy include investment, government purchases and exports while leakages include savings, taxes and imports. Government taxes leak out of the circular flow model, and then government spending injects them back into the economy.

Likewise, why do leakages 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.”

Also, what are leakages in economics?

Leakage refers to capital or income that exits an economy or system rather than remaining within it. In a two-sector model exhibiting a circular flow, all individual income is sent back to employers when goods and services are purchased, and back to employees through wages and dividends.

What is injection in economics?

Definition of Injection: An injection occurs when funds are added to an economy from a source other than households and businesses. Sources of injections include: government spending, investment, and exports.