Money leakages make it more difficult to use monetary policy to pull the economy out of a recession.

Question

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Money leakages refer to funds that are taken out of the economy or not spent due to taxes, imports, savings, or investments in foreign countries. If there are significant leakages, it reduces the effectiveness of monetary policy in stimulating economic activity since there is less money available to circulate in the economy. Therefore, it becomes more difficult to use monetary policy to pull the economy out of a recession.

Money Leakages Make It More Difficult to Use Monetary Policy