Investment is an injection into the circular flow resources are used and paid for in a period of time resources are used and paid for in a period of time the consumption of the item may occur next period, but the money flow occurs today. The circular flow of income is a good place to start it shows all of the money coming into an economy ( injections ) and all of the money that goes out of an economy ( leakages or withdrawals ) it allows you to see the 'general' reasons why an economy might grow or shrink in size. Five sector circular flow of income of australian economy outline the main features of the five-sector circular flow of income model of the australian economy - five sector circular flow of income of australian economy introduction explain how leakages and injections influence the level of economic activity. 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. Injections-leakages model: a macroeconomic model that balances non-consumption expenditures on production (injections) and non-consumption uses of income (leakages) that is used to identify the equilibrium level of, and analyze disruptions to, aggregate production and income.
21 the level of overall economic activity (questions) past paper essays nov 2013 3 (a) explain how changes in the size of the circular flow depend on the relative size of injections and leakages. If leakages are greater than injections then national income will fall, leading to a drop in demand for goods and services/economic activity and thus a fall in the demand for labour the level of employment will fall. The circular flow of economic activity is a model showing the basic economic relationships within a market economy it illustrates the balance between injections and leakages in our economy.
Macro injections and leakages - free download as word doc (doc / docx), pdf file (pdf), text file (txt) or read online for free keynesian economics is a theory of macroeconomics developed by john maynard keynes equilibrium level of aggregate production generated by the keynesian cross version of the. The essential part to look at is that there are leakages and injections to the circular flow of the economy ultimately any leakage or injection multiplies through the circular flow at the ratio of labor income/capital income. Fiscal policy and monitary policy influence the level of spending in the economy by: effecting leakages from, and injections into, the circular flow government economic policy should stimulate the economy during. The level of economic activity will change following a change in either injections or withdrawals an economy will grow if the value of injections is greater than the value of withdrawals, or shrink if the value of withdrawals is greater than injections.
Explain how leakages and injections influence the level of economic activity and explain how the government influences economic activity 1165 words | 5 pages with reference to examples, assess the degree to which the level of economic development of a country affects planning and management in urban areas. A common alternative to the keynesian cross presentation of the keynesian economic theory is the injections-leakages model whereas the keynesian cross focuses on the equilibrium balance between aggregate production and aggregate expenditures, the injections-leakages model focuses on the equilibrium balance between injections and leakages. The circular flow of income shows connections between different sectors of our economic system it revolves around flows of goods and services and factors of production between firms and households it revolves around flows of goods and services and factors of production between firms and households. Leakages and injections you will see later that governments can spend more than they earn to deliberately influence the level of leakages and injections to affect the level of national income slide19. It represents an injection in the circular flow, and unlike leakages, increases the size of the circular flow of income and therefore increasing the level of economic activity spending on investment would lead to rising expenditure, productions, employment and income levels in the economy.
The economy runs like a circular flow of money and physical goods what is produced must be purchased to sustain the current level of economic activities in other words, what is not consumed (leakages) in the income stream must be plowed into the economy in the form of investment (injections)now, realized (actual) leakages from the spending streams and realized (actual) injections into the. Explain how the size of the circular ﬂ ow will change , entrepreneurship goods and services expenditure on goods and services households firms 107 21 economic activity – the level of overall economic activity m06_econ_sb_0370_ch06indd 107 18/09/2014 11:06 subject vocabulary when leakages injections, the amount of income ﬂ. This video, aimed at school level economists (as-level or ib), explains the role of households and firms in the economy and how money circulates between the two.
National income - factors affecting the size of national income key learning outcomes introduction sample exam q&a student activity key learning outcomes understand the factors that determine the size of a country's national income understand the concept of the multiplier distinguish between a closed economy and an open economy factors that affect the savings rate. Definition of fiscal policy fiscal policy involves the government changing the levels of taxation and government spending in order to influence aggregate demand (ad) and the level of economic activity stimulate economic growth in a period of a recession keep inflation low (uk government has a. To stop fluctuation between leakages and injections the government influences the levels of spending through the use of fiscal and monetary policy recession - a period of negative economic growth (negative gross domestic productgdp) of at least 6 months duration. Economics economics is a social science that is applied to the production, distribution, exchange, and consumption of goods and services economists focus on the way in which individuals, groups, busi.