Chapter 17, Problem 13AA

To determine

To identify: The injections in circular flow of income.

Explanation of Solution

Circular flow income shows the flow of income between the business and the consumers. There are certain leakages and injections in the circular flow of income. Some of the income is removed from the circular flow and is referred to as leakages while some is added back as an offsetting of leakages and are said to be injections.

The two injections in circular flow of income to balance leakages are:

1. Business investment such purchasing new plants, equipment and increase in inventories.
2. Government spending such as maintaining national parks etc.