Leakages+and+Injections


 * Leakages and Injections**

Lets say for instance, that household #1 earns an income of 2,000 a month,they put 200$ in savings. The money is going to the bank than the bank writes up a financial claim. The bank is than able to use that money to loan to firms.Leakages lead to a decrease in economic activity. If the sum of all the leakages is more than the injections there tends to be unemployment or deflation.
 * Leakages-** Is money leaving that simple circular flow and does not directly go back to the Households.

//Examples of Leakages// where eligible. This transaction is called transfer payments, such as subsidies, AISH, Employment Insurance and CPP. coming into a country and money leaving that country.
 * Savings: Households saving a portion of their income which than allows the bank to give businesses/firms a loan.
 * Taxes: The government is deducting a portion of the households income which then goes directly back to the household
 * Import spending: Is money leaving a country to pay for imported goods made by other countries. It is simply goods

does not come directly from the households. An example of injections is investment spending it results in a physical increase in plant or equipment. Another way to look at investment spending is an increase in the economy’s stock of capital goods. It is money that enters the circular flow. An example is spending from firms and the government and not directly from households. Injections lead to an increase in economic activity. If the sum of all the injections are more than the leakages there tends to be expansion or inflation.
 * Injections-** Is spending that is not dependent on the current level of income. Money that is received by firms that

//Exampl////es of Injections//


 * Investment Spending: Is when businesses buy capital goods funded by loans from the bank.
 * Government Spending: Is when the Government buys goods and services from other businesses using net taxes.
 * Export Spending: Goods leaving the country and money coming in from the selling of the goods.


 * Resources:Dr.Power's Class Discussion, Principles of Macreconomics.Sayre Morris- Page 92-94, Google Books**