Which of the following are leakages from the circular flow of income?
A) Savings, taxes, and imports
B) Investment, government purchases, and exports
C) Investment, taxes and bonds
D) Imports, wages and taxes

Question

Quizplus · Accepted Answer

Savings, taxes, and imports are leakages because they represent money that is not circulating within the economy. Savings are money not spent on goods and services, taxes are money paid to the government that is not directly injected back into the economy, and imports represent money leaving the economy to pay for goods produced abroad. In contrast, choices B and C represent injections into the circular flow of income, and choice D only includes one leakage (imports) along with two incorrect options (wages and taxes).

Which of the Following Are Leakages from the Circular Flow