NOT an injection into the circular flow?

NOT an injection into the circular flow?

• A. Taxes (T)
• B. Investment (I)
• C. Government Expenditure (G)
• D. Exports (X)

Answer: (A)

In the circular flow of income, injections are sources of spending that add to domestic income: investment by firms, government expenditure, and exports to the rest of the world. Taxes take money out of the economy, reducing household spending and overall demand; they are withdrawals, not injections. The government uses tax revenue to fund its spending, but the act of taxation itself does not inject new spending into the economy. So taxes are not an injection. The other items—investment, government expenditure, and exports—directly increase spending in the economy, so they are injections.

In the circular flow of income, injections are sources of spending that add to domestic income: investment by firms, government expenditure, and exports to the rest of the world. Taxes take money out of the economy, reducing household spending and overall demand; they are withdrawals, not injections. The government uses tax revenue to fund its spending, but the act of taxation itself does not inject new spending into the economy. So taxes are not an injection. The other items—investment, government expenditure, and exports—directly increase spending in the economy, so they are injections.