question_answer

Explain the flow variables of injections and leakages along with suitable examples.

or

Give the meaning of real flow and money flow.

 

Answer:

Injections These are the flow variables which cause an expansion or increase in the process of circular flow (or the process of income generation) in the economy. Following are the examples of injections; (i) Investments                                        (ii) Exports (iii) Consumption expenditures by the household or the government                             Leakages These are the flow variables which cause a contraction or decrease in the process of circular flow in the economy. All these variables reduce the flow of income in economy and are also called withdrawals. Following are the examples of leakages: (i) Savings                                              (ii) Imports (iii) Taxes by the government                                                               Or Real Flow It refers to the flow of goods and services across different sectors of the economy, e.g. Flow of factor services from the household sector to the producing sector and flow of goods and services from producing sector to household sector. Real-flow in a two-sector economy Money Flow It refers to the flow of money, in terms of 'payments and receipts' across different sectors of the economy, e.g. Flow of money from the household sector to the producing sector in terms of payments for the purchase of goods and services and flow of money by the producing sector to household sector in -terrns of factor payments. Money flow in a two-sector economy without financial market