ECONOMICS
BUSINESS CYCLES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Taxes
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Government expenditures
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Social Security payments
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Consumer spending
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Saving
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Detailed explanation-1: -Non-consumption uses of income-savings, taxes, and imports-are “leaked” out of the main flow.
Detailed explanation-2: -Answer and Explanation: The Savings and the taxes are the leakages from the circular flow diagram.
Detailed explanation-3: -Leakages are referred to as the non consumption uses of the income and examples of leakage are savings, taxes and imports. Also read: Circular Flow of Income and Methods of Calculating National Income.
Detailed explanation-4: -Taxes (T) imposed by the government reduce the flow of income. Money paid to foreign companies for imports (M) also constitutes a leakage. Savings (S) by businesses that otherwise would have been put to use are a decrease in the circular flow of an economy’s income.
Detailed explanation-5: -The three leakages are saving, taxes, and imports. These are termed leakages because they are “leaked” out of the core circular flow of consumption, production, and income. Equilibrium in the injections-leakages model relies on a balance between the injections into the core circular flow and leakages out of the flow.