<Ul> <Li> Leakage means withdrawal from the flow . When households and firms save part of their incomes it constitutes leakage . They may be in form of savings , tax payments , and imports . Leakages reduce the flow of income . </Li> <Li> Injection means introduction of income into the flow . When households and firms borrow the savings , they constitute injections . 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 . Financial institutions or capital market play the role of intermediaries . This means that income individuals receive from businesses and the goods and services that are sold to them do not count as injections or leakages , as no new money is being introduced to the flow and no money is being taken out of the flow . </Li> </Ul>
<Ul> <Li> Leakage means withdrawal from the flow . When households and firms save part of their incomes it constitutes leakage . They may be in form of savings , tax payments , and imports . Leakages reduce the flow of income . </Li> <Li> Injection means introduction of income into the flow . When households and firms borrow the savings , they constitute injections . 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 . Financial institutions or capital market play the role of intermediaries . This means that income individuals receive from businesses and the goods and services that are sold to them do not count as injections or leakages , as no new money is being introduced to the flow and no money is being taken out of the flow . </Li> </Ul>
3 leakages from the circular flow of income
3 leakages from the circular flow of income
savings tax payments imports
savings tax payments imports