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As I see it, transfer payments are injections as it increases the income of low-income earners. The increase in income will lead to an increase in demand and increase consumption and aggregate demand.

Yes, according to my lecturer transfer payments are an injection.

126/120 = 5%

Yep that's right. My bad!

Perfectly inelastic - demand curve is vertical. A change in price does not effect the quantity demanded. Perfectly inelastic - demand curve is horizontal. The output increases but only at a certain price level.

Do you know what part of the circular flow, transfer payments would be in then? The government pays out money (collected from tax etc) to people and so surely this would inject more money into the economy?

I understand government exp. is an injection, but what about government borrowings? I thought transfer payments was an example of government expenditure.

Just wondering if transfer payments are classified as injections into the circular flow? Also, what would government borrowing be classified as? Cheers!