4.2.2—Injections and leakages

Investment, government spending and exports are injections into the circular flow. Saving, taxation and imports are leakages (withdrawals).

In a simple model, total injections equal total leakages when the circular flow is stable. A change in one component affects income and output through linked spending, even when the multiplier is not calculated.

A rise in government infrastructure spending is an injection; households saving more is a leakage. If injections exceed leakages, national income tends to expand initially.

A leakage is not automatically harmful and an injection is not automatically beneficial; effects depend on capacity, inflation and what is spent.