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Leakages (Circular Flow)

The main leakages out of the circular flow of income are:

  • Taxes: This is when the government takes money from businesses and households in the form of taxes.
  • Savings: This is when businesses and households save money instead of spending it.
  • Imports: This is when businesses and households buy goods and services from other countries.

Leakages take money out of the circular flow of income, which can lead to economic slowdown.