Asked by Alexis Rampey on May 26, 2024
Verified
Leakages cause diversion of income from the domestic spending stream.
Leakages
Economic terms referring to the outflow of funds from the economy, such as savings, taxes, and imports, that can reduce the impact of investment and government spending.
Domestic Spending
The total spending on goods and services within a country, including both consumer spending and government expenditure.
- Gain an understanding of how leakage and injection influence the economic cycle and affect Gross Domestic Product.
Verified Answer
JG
Juliana GalloMay 31, 2024
Final Answer :
True
Explanation :
Leakages, such as saving, taxes, and imports, reduce the amount of income available for domestic spending, thus causing a diversion of income from the spending stream. This can lead to a decrease in overall economic activity and growth.
Learning Objectives
- Gain an understanding of how leakage and injection influence the economic cycle and affect Gross Domestic Product.
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