• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

The circular flow of income and particular the injections and leakages have a substantial influence on the economic activity of the time. Economic activity is defined as the production and distribution of goods and service in an economy,

Extracts from this document...

Introduction

Explain how changes in the levels on injections and leakages can change the level of economic activity The circular flow of income and partrticular the injections and leakages have a substantial influence on the economic activity of the time. Economic activity is defined as the production and distribution of goods and service in an economy, processes like Government expenditure (G), investment (I), exports (X), imports (M), savings (S), and taxation (T) all play an important role in the level of activity within an economy. Savings is a significant process in the circular flow of income. This process is classified as a leakage as it involves people removing funds which would otherwise be spent. ...read more.

Middle

This means that the savings can be used as finance which may result in economic stimulas. The inverse effect of spending occurs when there is a great amount of investment within an economy. Investment is classified as an injection as it is an input of funds which may be used in the production process. These funds are fueled by savings which are distributed by investment agencies to individuals and more importantly business. The funds that are recived by business allows for expansion. This expansion increases the potential for a greater production and distribution, which inturn highlights the relationship between the injection of investment and economic activity. ...read more.

Conclusion

An import results in funds leaving an economy and entering another , this makes them a leakage. An export on the other hand introduces forign funds into the economy classifying them as injections. When an economy has increased imports, domestic markets are being demote. This slows production and in turn economic activity. However if there are increses in exports, domestic markets are producing at a greater rate as well as this more of an economies resources are being employed. This increase in productin is translated to a Increase in economic activity. In conclusion the link between economic activity and leakages & injections is a profound one. And a change in any of the economic factors (IGX and STM) has a substantial effect on Economic activity. (IGX goes up economic activity follows, and if STM goes up economic activity slows.) ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. free-market economy and central planned economy.

    Crime has become out of control, with a thriving sex-industry as more and more women are forced into prostitution, both out of coercion and as recourse for lack of employment. Unemployment has surged as large companies shed workers and smaller companies were forced to close.

  2. An analysis of Why Economic Sanctions are bad. Quotes and argument.

    In the oil-and-gas sector, output and exports would expand by 25-to-50 percent (adding 3 percent to world crude oil production). This shows that while the sanctions have a profound effect economically on Iran, it has done nothing for the political aspect.

  1. The luxembourg Economy (Complete Review)

    Despite this on a national scale, rapid economic growth over the past two decades has substantially increased Luxembourg's labour force. As to be expected total employment has declined in relation to pre financial crisis periods. Furthermore domestic unemployment has risen to approximately 7.9% which is relatively high in comparison to other OECD economies.

  2. The role of MNC headquarter

    But still wants these to act in a way to works in favor of the corporation. Therefore they for example socialize their managers, by sharing goals, values and beliefs. By doing this, managers will think and therefore act in accordance to the way of the multinational corporation.

  1. To what extent does the present economic crisis spell the end of capitalism as ...

    Unfortunately, part of our modern society constituting those supporting this motion belief that capitalism breeds poverty contrasting what the father of economics beliefs in (Butters, n.d.). The bail out and stimulus packages have not been in contrast to the teaching of capitalism but to the strengthening of the mutual relationship between the two.

  2. Has the Time Come to Legalize Drugs?

    Fox called for a reversal of Calder´┐Żn's decision to send the army into the streets to fight the drug cartels because ``the army is not prepared to do police work, and we are seeing day to day how the army's image is losing ground in Mexico'' as a result of this war.

  1. Mutual Funds vs ETFs

    "Comfort with an investment vehicle is not a luxury but rather a necessity" (Wiandt and McClatchy 26). Hence to calm this curse of earning more they started to invest the money of other people into the business. In return these merchants promised to give them profit according to share.

  2. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    better understanding of medical knowledge and sanitation, lower child mortality rates and higher expectations of living resulted. Also, much of this population increase is attributed to technological advancements that allowed for greater food production therefore creating food surplus. The third factor was Britain's colonial empire, which provided raw materials for the factories as well as more markets for their goods.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work