Asked by Nikki Congdon on May 26, 2024
Verified
Which of the following is an example of a leakage from the circular flow of income and expenditure?
A) Government purchases of goods and services
B) Taxes
C) Investment
D) Exports
E) Consumption expenditures
Leakage
In economics, the term refers to a situation where income or resources exit an economy or system rather than being retained or reinvested.
Circular Flow
Describes the continuous movement of goods, services, and money between households and businesses in an economy, illustrating how these entities interact in the markets for resources and products.
- Separate and evaluate the impacts of injections versus leakages within the circular flow framework on the Gross Domestic Product.
Verified Answer
KR
Kevin ReynaMay 31, 2024
Final Answer :
B
Explanation :
Taxes are considered leakage because they reduce the amount of disposable income available for households to spend on consumption or save.
Learning Objectives
- Separate and evaluate the impacts of injections versus leakages within the circular flow framework on the Gross Domestic Product.
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