Leakages and Injections

Leakage or withdrawals from the circular flow. Not all income will flow from the households to firms directly. The circular flow below shows that some part of the households income will be put aside for future spending i.e saved.

Paid to the government in flows of taxes.

Spend on foreign made goods imported into the country in form of capital output

Saving (s)

Represents income earned but not spend on current consumption of goods and services savings may come back to flow if deposited in commercial bank or any financial institution when borrowed by entrepreneur or it can be a complete leakage if savings are hoarded.

Import (M)

When households spend most of their income or foreign goods that are imported the income will be earned by the foreigner, all expenditure on imports is treated or a leakage

Tax (T)

Whenever; government taxes the firms , it means that part of the income will not be distributed to the households likewise m, when government taxes households it means that part of the income they have earned from the firms out of their resources will not be spend on the goods and services produced by the firms

Capital output (CO)

Whenever investors remove capital from our economy, it will constitute a leakage