jarriouswesley7
Answered

Which best describes why taxes and savings are considered leakage factors?

A. They take money out of households.
B. They take money out of the economic system.
C. They take money out of the economic sectors.
D. They take money out of the financial sector.



Answer :

GinnyAnswer

Final answer:

Savings, taxes, and imports are termed 'leakages' as they withdraw money from the economy, affecting economic activity and the multiplier effect.


Explanation:

Savings, taxes, and imports are considered 'leakages' in calculating the multiplier effect because they take money out of the economic system. Savings are funds that are not spent on consumption, taxes reduce the disposable income available for spending and investment, and imports represent expenditures that leave the domestic economy.

These factors lead to a reduction in the amount of funds circulating within the economy, impacting economic activity and the multiplier effect.

Understanding these leakages is crucial in macroeconomics as they influence overall economic stability and growth.


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