Injections and Withdrawals
Injections are income additions from outside the households-firms circuit: investment (I), government spending (G), and exports (X). Withdrawals are income removals: savings (S), taxes (T), and imports (M). Equilibrium occurs where injections equal withdrawals.
Real World
The UK government's £400 billion COVID support package in 2020–21 was a massive injection that prevented the circular flow from collapsing, keeping household incomes afloat even as private investment and exports fell sharply.
Exam Focus
State the equilibrium condition S+T+M = I+G+X explicitly, then explain what happens when the equation is unbalanced.
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