Withdrawals from the money stream can be compensated for by additions of money and additions to the money stream can be compensated for by withdrawals.

• If total withdrawals exceed total injections, there will be a decrease in the level of economic activity, with declining production, income and expenditure (economy contracts).
• If total injections exceed total withdrawals, there will be an increase in the level of economic activity, with rising production, income and expenditure (economy expands).

According to the circular flow of economic activities, differences in injections and withdrawals will be eliminated over time and injections and withdrawals will eventually be in equilibrium.

This will occur as follows:

• If total withdrawals exceed total injections, there will be a decrease in economic activity, but total withdrawals will also decrease because consumers have less income to save, spend on imports or pay in tax. Therefore, injections and withdrawals will eventually be equal again and the economy will be in equilibrium again, but at a lower level of income and expenditure.
• If total injections exceed total withdrawals, there will be an increase in economic activity, but total withdrawals will also increase because consumers have more income to save, spend on goods or pay as tax. Therefore, injections and withdrawals will eventually be equal again and the economy will be in equilibrium again, but at a higher level of income and expenditure.

The government can have a significant influence on the money stream because it can change the level of taxation and government expenditure. By doing so, the government can manipulate the level of injections and withdrawals. It can stimulate the economy by increasing injections relative to withdrawals, or it can dampen economic activities by increasing withdrawals relative to injections.

The economy is in equilibrium when total injections equal total withdrawals (J = L).