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May 25, 2018 

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ACTION LAG: In the context of economic policies, a part of the implementation lag involving the time it takes for appropriate policies to be launched once they have been agreed to by policy makers. Another part of the implementation lag is the decision lag. For fiscal policy, this involves appropriating funds to government agencies (for government spending) or changing the tax code (for taxes) For monetary policy, this involves the buying and selling government securities in the open market. The action lag is usually shorter for monetary policy than fiscal policy.

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INJECTIONS LINE:

A graphical representation of the relation between the level of aggregate production and one or more injections. The three injections (non-consumption expenditures on aggregate production) are investment expenditures, government purchases and exports. The injections line sequentially adds, or layers, each of these three expenditures depending on the number of sectors used in the analysis (two, three, or four). The slope of the injections line depends on which if any of the expenditures are induced by aggregate production. The injections line is combined with the leakages line (containing saving, taxes, and imports) in the Keynesian injections-leakages model.
The injections line graphically illustrates the relation between one or more of the three injections--investment expenditures, government purchases and exports--and the level of aggregate production or income. This line is one half of the injections-leakages model used to identify and analyze the equilibrium level of aggregate production and income. The other half is the leakages line that illustrates the relation between aggregate production and one or more of the three leakages--saving, taxes, and imports.

The number of injections contained in the injections line depends on the number of sectors included in the injections-leakages model. The injections line used in the two-sector model contains only investment expenditures by the business sector. Government purchases by the government sector are added to investment expenditures for the injections line used in the three-sector analysis. And the four-sector model uses an injections line with exports by the foreign sector added to government purchases and investment expenditures.

The slope of the injections line depends on which if any of the injections are assumed to be induced by the level of aggregate production and income. Because exports are autonomous, the slope of the injections line thus depends on the marginal propensity to invest and the marginal propensity for government purchases.

Building the Injections Line

The Injections Line
The Injections Line


The exhibit to the right is the starting point for deriving the three alternative injections lines. As it currently stands, this exhibit is blank, except for the horizontal axis, which measures aggregate production, and the vertical axis, which measures the assorted injections. To move from this largely blank diagram to each of the three injections lines, we need to sequentially add investment expenditures, government purchases, and exports.
  • Two-Sector Injections Line: Let's begin with the injections line used in the two-sector injections leakages model. This is the simplest injections line in that it contains only a single injection--investment expenditures. A click of the [Investment] button displays this line. The line is horizontal, or perfectly flat, indicating that investment expenditures are totally autonomous. Including induced investment would give the line a slight positive slope equal to the marginal propensity to invest.

  • Three-Sector Injections Line: Next up is the injections line used in the three-sector injections leakages model. This injections line contains two injections--investment expenditures and government purchases. It is derived by layering or adding government purchases onto the investment line. A click of the [Government Purchases] button displays this new line. The line is also horizontal indicating that government purchases are also totally autonomous. Including induced government purchases would then increase the slope of the line based on the marginal propensity for government purchases.

  • Four-Sector Injections Line: Last on the list is the injections line used in the four-sector injections leakages model. This injections line contains all three injections--investment expenditures, government purchases, and exports. It is derived by layering or adding exports onto the three-sector injections line. A click of the [Exports] button displays this new line. The line is also horizontal indicating that exports are realistically assumed to be autonomous.

A Word About the Leakages Line

The other half of the injections-leakages model is the leakages line, which represents the relation between leakages, the non-consumption uses of the income generated from production--saving, taxes, and imports, and the level of aggregate production and income. Like the injections line, the number of leakages contained in the line depends on the number of sectors included in the analysis.

The leakages line used in the two-sector model contains only saving. Taxes are added for the three-sector model and imports are added for the four-sector model. The slope of the leakages line depends on induced saving and the marginal propensity to save, with adjustments if the analysis includes induced taxes and/or induced imports.

<= INJECTIONS-LEAKAGES MODELINNOVATION =>


Recommended Citation:

INJECTIONS LINE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: May 25, 2018].


Check Out These Related Terms...

     | injections | leakages line | injections-leakages model | leakages | saving-investment model | two-sector injections-leakages model | three-sector injections-leakages model | four-sector injections-leakages model | Keynesian model |


Or For A Little Background...

     | investment line | government purchases line | exports line | investment expenditures | government purchases | exports | aggregate expenditures | Keynesian economics | Keynesian cross | effective demand | induced expenditures | autonomous expenditures | macroeconomics | macroeconomic sectors | saving | taxes | imports |


And For Further Study...

     | expansionary fiscal policy | contractionary fiscal policy | automatic stabilizers | Keynesian cross and aggregate market | expenditures multiplier | accelerator principle | paradox of thrift | aggregate market analysis | business cycles |


Related Websites (Will Open in New Window)...

     | The General Theory of Employment, Interest, and Money |


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