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:

Positive Net Present Value

An indicator that an investment is expected to generate more cash than the initial amount invested, viewed positively in capital budgeting.

Regular Dividend

A fixed amount paid by a company to its shareholders out of its profits (or reserves) on a regular schedule.

Dividend Policy

A company's approach to distributing profits back to its shareholders in the form of dividends.

Reverse Stock Split

A business move that reduces the total number of current stock shares, making the remaining shares more valuable on a proportional basis.