Question
Economics Question on Macroeconomics
Which of the following is NOT an example of leakage from the circular flow of income?
A
Savings
B
Taxes
C
Imports
D
Government spending
Answer
Government spending
Explanation
Solution
Leakages in the circular flow of income refer to withdrawals of money from the economy, such as savings, taxes, and imports. These reduce the overall economic activity. Government spending, on the other hand, is an injection, meaning it adds money into the economy, stimulating demand.