PRC-3 · Chapter 9 · Question 16 of 45
According to the circular flow of income model, which of the following actions by a domestic household acts as a 'leakage' or 'withdrawal' from the domestic economy?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Purchasing an imported luxury car from Germany
Explanation
Imports represent a leakage because domestic money is sent abroad to pay for foreign goods, removing it from the domestic circular flow.
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