In the circular flow model, savings is considered a leakage because
A)it does not get counted toward an individual's accumulated wealth.
B)it becomes an input toward venture capital
C)it contributes to the budget surplus.
D)it is the amount that consumers do not spend of their disposable income.

Question

Quizplus · Accepted Answer

Savings is considered a leakage because it is the amount that individuals do not spend of their disposable income. It is not being injected back into the economy through consumption, and therefore represents a leakage from the circular flow of income and expenditure.

In the Circular Flow Model, Savings Is Considered a Leakage