Circular flow of income

Circular flow of income

1. Increase in injections increase level of national income

   • Investments are referred as injections

2. Withdrawals reduce the size of the national income

   • Savings are referred as withdrawals
     • Savings are income induced
       • Meaning savings will increase as income increase and vice versa if income decreases

3. If withdrawals and injections equal then the economy is said to be in equilibrium

4. If injections are not equal to withdrawals then the economy is in disequilibrium

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