Question

which of the following is not a leakage from the circular flow of income?
a.Corporation tax
b. expenditure on foreign goods c.personal savings
c. retirement pensions

Answer 1

I think answer should be option B

Answer 2

Answer:

(d) Retirement pension is not a leakage from the circular flow of income.

Explanation:

• An outflow of money from the circular flow model is referred to as leakage. They are the portion of the money that a household does not spend on goods and services.
• Savings is that portion of the household's income that is not spent on goods and services or utilized to pay taxes. It stays with financial organizations such as banks, which can lend more money to businesses.
• Import payments are made to the foreign sector in exchange for goods and services purchased from them. This is a money outflow from the economy.
• Tax revenue is the portion of the money paid to the government by individuals and businesses. Instead of moving to the goods market, it ends up in the hands of the government.
• Government Expenditure includes the government's overall spending on goods and services, as well as corporate subsidies and household transfer payments. Government payments such as social security, pensions, retirement benefits, and temporary assistance to poor families are examples of transfer payments.
• Thus, pension as opposed to leakage is an injection which means it is an inflow of income to the circular flow.