Injections refer to the government expenditure or exports or other such variables which cause increase in level of aggregate demand. Circular flow of income rises. Leakages (or withdrawals) refer to the government taxes or imports or such variables which cause a decrease in AD. Circular flow of income falls. Due to injections, AD curve shifts upwards while due to leakages, AD curve shifts downwards. In the diagram,
(i) Due to an injection of government expenditure, AD increases and equilibrium level of income shifts upwards from point `E "to" E_(1) or M "to" M_(1)`. Thus injections cause a positive multiplier effect. (i) Due to leakages in the form of taxes, AD decreases and equilibrium level of income shifts downwards from `E "to" E_(1) or M "to" M_(1)`. Thus leakages cause a negative multiplier effect.
