Background
Assume that in 2015 the economy expanded (in expansion phase of business cycle).
Further assume that net injectionswithin the economy are $9,000 mill. In this year the financial sector has a net leakage of $1,500 mill, the government sector has a net injection of $6,500 mill and the external sector has a net injection $4,000 mill.
During 2016 the transactions in the sectors of the economy were:
Imports $25,100
Savings $18,500
Government spending $61,800
Private investment $19,700
Exports $25,400
Taxes $62,200
During 2017 the transactions were:
Taxes $66,100
Private investment $18,300
Exports $28,100
Government spending $69,200
Imports $26,100
Savings $20,200
1,Calculate the net injections / leakages for 2016 and 2017. Also undertake a sectoral analysis for both years.
2,Explain the effect of the changes on the economy, i.e. whether the economy expanded or contracted, in each of the two years, and why.
3,Which sector is expected to be the biggest contributor to the overall change in each of the two years? Give reasons.
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