Leakages and Injections
What Is Economics? Scarcity, Choice, and Economic Models
AO2·AO4
Syllabus requirement
Identifies savings, taxes, and imports as leakages and investment, government spending, and exports as injections, linking them to changes in national income.
Assessment objectives
AO2 Application and AnalysisAO4 Use of Appropriate Skills
Summary
This topic explains leakages and injections in the open-economy circular flow model: leakages (withdrawals) remove money from the flow, while injections add money into it. Key leakages are savings, taxation and imports; key injections are government spending, investment and export earnings. The balance between total withdrawals (W) and total injections (J) determines whether overall economic activity rises, falls or is in equilibrium.