Which of the following is a leakages from the circular flow?
A) Household saving and government spending
B) Business investment and household saving
C) Net taxes and household saving
D) Government spending and business investment
E) Net taxes and government spending

Question

Quizplus · Accepted Answer

Savings and taxes are considered leakages from the circular flow because they represent a portion of income that is not spent on goods and services. Government spending and business investment are injections into the circular flow as they increase the amount of money flowing through the economy. Therefore, the only option that includes a leakage is C (Net taxes and household saving).

Which of the Following Is a Leakages from the Circular