Q.In a four-sector open economy, the leakages and injections in a year (in ₹ crore) are: Saving = 400, Taxes = 300, Imports = 200; Investment = 350, Government expenditure = 380, Exports = 170. Are total leakages equal to total injections? If not, is the circular flow tending to expand or contract, and by how much?

The circular flow is in equilibrium when total leakages (S + T + M) equal total injections (I + G + X); compare the two totals to see whether income tends to rise or fall.

In a four-sector economy, the three leakages are Saving (S), Taxes (T) and Imports (M), and the three injections are Investment (I), Government expenditure (G) and Exports (X). The circular flow is in equilibrium when total leakages equal total injections.

Step 1 — total leakages:

Step 2 — total injections:

Step 3 — compare. Total leakages (₹900 crore) exactly equal total injections (₹900 crore). When leakages equal injections, the income withdrawn from the circular flow is precisely matched by the spending injected back into it, so national income neither rises nor falls — the economy is in equilibrium. …

An equivalent quick check: net leakage = (S + T + M) − (I + G + X) = 900 − 900 = 0. A net leakage of zero confirms equilibrium; a positive v …

A frequent error is pairing the wrong items — e.g. treating Saving as matching Taxes, or forgetting that Imports (a leakage) is matched against Exports (an injection). The rule is simply that ALL three leakages are summed …