The circular flow of income

Leakages

items that remove money from the circular flow of income = decreased demand = lower economic growth

- savings (S), taxation (T), imports (M)

Injections

flows of money into the circular flow of income = increased demand = higher economic growth

- investment (I), Government expenditure (G), exports (X)

what happens if the leakages are greater than the injections

if leakages are greater than injections, income will tend to fall. until equilibrium is regained.

what happens if the injections are greater than the leakages

if injections are greater than the leakages, income will tend to rise until equilibrium is regained.