Friday, 2 March 2012


      LEAKAGES:-Leakage means withdrawal from the flow.When households and firms save part of their incomes it constitutes leakage.They may be in form of tax payments and imports also.Leakages reduce the flow of income.

      INJECTIONS:-Injections 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 (a) investment,(b) government spending and (c) exports.So long as leakages are equal to injections circular flow of income continues indefinitely.Financial institutions or capital market play the role of intermediaries.

No comments: