Explain how Leakages and Injections Influence the Level of Economic Activity and Explain how the Government Influences Economic Activity

Leakages and injections have a great influence on economic activity, as they basically are economic activity. Without leakages and injections there would be no circular flow, without which the economy would run as it does now. The government also plays a major role in the running of the economy as it has a great influence over what goes in and out of the circular flow by the way of taxation, imports and exports. The five-sector …

…This has an overall impact on the level of economic activity. The government has the ability to either stimulate the economy by having greater injections and fewer leakages, or do the opposite by increasing the number of leakages in relation to injections. Overall the economy is made up of leakages and injections, which is all part of the circular flow. The major participants are the individuals, business firms, financial institutions, international trade and the government.