Mba 02 macro economic analysis
- 1. MBA 02- MACRO ECONOMIC ANALYSIS TOPIC: LEAKAGES AND INJECTIONS Reported by: Hazel R. Tanilon
- 2. LEAKAGES Income not spent directly on domestic output but instead diverted from the circular flow. They “leak” income away from the product markets, making less available for factor payments and household income.
- 3. TYPES OF LEAKAGES Savings (S) - When households do not spend all of their income, money leave the circular flow. Taxes (T) - Collection provided by households and firms to government. Imports (M) - When Filipinos buy foreign goods and services, money leave the circular flow. L = S + T + M LEAKAGES = SAVINGS + TAXES + IMPORTS
- 4. INJECTIONS is an addition of spending to the circular flow of income. They “inject” revenue into the product markets that is used for factor payments and become household income.
- 5. TYPES OF INJECTIONS Investment (I) – When Businesses purchase new capital goods, money enters the circular flow. Government Spending (G) -When the government redistributes this income in the form of welfare payments, that is a form of government spending back into the economy. Exports (E) - generates income for the exporters from overseas residents INJECTIONS = INVESTMENT + GOVERNMENT SPENDING + EXPORTS J = I + G + X
- 6. TYPES OF INJECTIONS Investment (I) – When Businesses purchase new capital goods, money enters the circular flow. Government Spending (G) -When the government redistributes this income in the form of welfare payments, that is a form of government spending back into the economy. Exports (E) - generates income for the exporters from overseas residents INJECTIONS = INVESTMENT + GOVERNMENT SPENDING + EXPORTS J = I + G + X