Imports are leakages from the circular flow of income and expenditure model.

Question

Quizplus · Accepted Answer

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.

Imports Are Leakages from the Circular Flow of Income and Expenditure