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How do injections and withdrawals effect economic activity?
Sanan1234
Injections include Export revenue, Investment and Government expenditure.
Withdrawals include Saving, Tax, Import expenditure.
All of it affects the component of Aggregate Demand hence affects the economic activity. For e.g. High savings would mean low consumption. This would cause some firms to make losses and leave the industry etc.
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When planned withdrawals are more than planned injections, there is too little aggregate demand. I'm no economics expert so i don't know whether this would lead to a downward mutipler or a negative accelerator effect. Withdrawals are savings, taxes and imports and it seems to me that if savings increase, there would be a negative accelerator effect, but if imports increase, there would be a downward multiplier, but don't take my word for it.
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