Question:
Which of the following is an example of a leakage from the circular flow of income?
(1) Investment
(2) Transfers
(3) Imports
(4) Government purchases
(5) Exports
Correct Answer:
(3)
Answer Explanation:
Leakages (withdrawals) represent money leaving the domestic circular flow. The three main leakages are Savings (S), Taxes (T), and Imports (M), as money spent on imports goes to foreign firms. Investment, Govt purchases, and Exports are injections.
Topic: National Income Year: 2021
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