Question

With the help of relevant examples, explain the meaning of injections in the circular flow of income.

Answer 1

Injections are additions to the circular flow of revenue. These boost overall expenditure and output in the economy.

Examples of Injections:

• Investment (I): It refers to the investment of firms in the amount of money that businesses spend on capital goods.
  E.g., A factory invests ₹ 1 crore in new machinery.
• Government Expenditure (G): Government spending on public goods and services.
  E.g., Building a government hospital.
• Exports (X): Income from the sale of commodities abroad.
  E.g., Exporting Indian tea to the UK.