What add funds to the circular flow?

Step 1: Analyze the question The question asks what adds funds to the circular flow of income. The key word is "adds."

Step 2: Explain the concept The circular flow of income shows how money moves between households and firms in an economy. Money can enter or leave this flow:

• Injections add money into the circular flow. They are: • Investment (I) • Government spending (G) • Exports (X)
• Leakages (withdrawals) take money out of the circular flow. They are: • Savings (S) • Taxes (T) • Imports (M)

Step 3: Evaluate the options

• A. Expenditure approach: This is a method of measuring national income (C + I + G + X − M). It does not add funds to the flow.
• B. Withdrawal: This removes money from the flow, so it is wrong.
• C. Leakages: This is another word for withdrawals, so it is also wrong.
• D. Injection: This adds money into the flow, so it is correct.

Step 4: Answer The correct option is D. Injection.

Exam tip: Remember it this way: "Injection = In" (money goes into the economy), while "Leakage = Leave" (money leaves the economy). For equilibrium, Injections = Leakages (J = W).