Money leaving the economy through savings, taxes, and imports is called:

• A. Household sector
• B. Leakages
• C. Overseas sector
• D. Circular flow model

Answer: (B)

In the circular flow of income, money leaves the domestic economy through three channels: savings, taxes, and imports. This withdrawal from the spending stream is called a leakage because it reduces the amount of income circulating to domestic producers. When households save, that portion isn’t spent on domestically produced goods and services. Taxes take income that could be spent, and spending on imports sends money to foreign producers. Leaks shrink the domestic flow of spending, and injections like investment, government spending, and exports push money back into the economy. The other terms don’t fit as well: the household sector is just a group, the overseas sector refers to foreign activity, and the circular flow model is the overall framework, not the specific process of withdrawals.