Which of the following is a leakage from the circular flow?

Question

Quizplus · Accepted Answer

Imports are a leakage from the circular flow of income and expenditure because they represent spending by domestic agents on goods and services produced abroad, which does not contribute directly to domestic production and income. Imports reduce the amount of money flowing within the domestic economy and cause a leakage from the circular flow. The other options are not leakages but rather injections into the circular flow: investment represents businesses' spending on capital goods that increase production and income, government purchases represent the government's spending on goods and services that also contribute to production and income, and government borrowing represents the government's borrowing to finance its expenditure, which can either increase or decrease the level of income and output depending on the use of the borrowed funds.

Which of the Following Is a Leakage from the Circular