In the circular flow model, which of the following is considered a leakage?
A)Investment spending
B)Business spending
C)Household saving
D)Total exports

Question

Quizplus · Accepted Answer

In the circular flow model, leakage refers to any income that is not being used for consumption, investment or government spending. Household saving is considered a leakage because it is income that is not being spent in the economy. Therefore, only choice C (Household saving) is considered a leakage in the circular flow model. Investment spending, business spending, and total exports are all considered injections into the economy since they add income to the circular flow.

In the Circular Flow Model, Which of the Following Is