ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Money flowing into the economic system
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Money flowing out of the economic system
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Government spending, exports, or investments
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Income generated in parallel markets
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Detailed explanation-1: -It refers to the withdrawal of money from the circular flow of income. When households and firms save a part of their income, it leads to a leakage from the circular flow of income.
Detailed explanation-2: -Leakage is usually used in relation to a particular depiction of the flow of income within a system, referred to as the circular flow of income and expenditure, in the Keynesian model of economics. Within this depiction, leakages are the non-consumption uses of income, including saving, taxes, and imports.
Detailed explanation-3: -Some transactions take money out of the economy. That is, the money is not being utilised elsewhere in the economy. These are leakages.
Detailed explanation-4: -When injections are greater than withdrawals the amount of money in the circular flow increases, representing economic growth. When injections are less than withdrawals the amount of money in the circular flow decreases, representing a fall in real GDP.
Detailed explanation-5: -There are four sectors and three markets in the circular flow of income model. The four sectors are the household sector, the firm sector, the government sector and the foreign sector. The three markets are the goods market, the factor market and the financial market respectively.