Asked by Elizabeth Gossum on Apr 24, 2024
Verified
Imports are leakages from the circular flow of income and expenditure model.
Circular Flow
A model that illustrates the movement of goods, services, and money among households, businesses, government, and the foreign sector in an economy.
Leakages
In economics, it refers to the withdrawal of potential spending from the economy's circular flow, primarily through savings, taxes, and imports.
- Acquire insight into the roles of leakage and injection in the economic cycle and their repercussions on Gross Domestic Product.
Verified Answer
LM
Lindsay Martinez6 days ago
Final Answer :
True
Explanation :
Imports represent a leakage from the circular flow of income and expenditure model because they represent spending by domestic consumers and businesses on goods and services produced abroad, which means that the money is leaving the domestic economy and being spent abroad. This reduces the amount of money circulating in the domestic economy and therefore is a leakage from the circular flow of income and expenditure.
Learning Objectives
- Acquire insight into the roles of leakage and injection in the economic cycle and their repercussions on Gross Domestic Product.
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