Answer to Question #113253 in Macroeconomics for ESTHER KUFFOUR

Question

If injections exceed withdrawals, will GDP go on rising indefinitely, or will a new equilibrium be reached? explain how

Answer 1

Injections: Injections increase income in the circular flow of income. They include government purchases, income from exports and investment incomes.

Withdrawals: Withdrawals reduce income in the circular flow of income. They include government taxes, savings and exports.

If injections are equal to withdrawals, the level of GDP remains the same.

If injections are more than the withdrawals, the economy grows and the GDP keeps on increasing.