In the Circular Flow Model, Savings Is Considered a Leakage

question 46

Multiple Choice

In the circular flow model, savings is considered a leakage because

• A)it does not get counted toward an individual's accumulated wealth.
• B)it becomes an input toward venture capital
• C)it contributes to the budget surplus.
• D)it is the amount that consumers do not spend of their disposable income.

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Definitions:

Growth Rate

The rate at which a company's sales, revenue, or other financial metrics increase over a specific period.

Annual Dividend

The total dividend payment a shareholder receives from a company in one fiscal year.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which reflects how it finances its overall operations and growth.

After-Tax Cost

The actual cost of an expenditure after accounting for the effects of taxation on the expense.