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National Income Accounting
Question
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Explain the concept of 'leakages' and 'injections' in the circular flow of income.

Answer

A leakage means withdrawl of a part of income (money) from circular flow of income.
For instance, savings and taxes by households and firms as well as import payments are forms of leakage. Injections are addition of money to the circular flow of income, e.g., investments, government expenditure, export payments.

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