Leakages
Definition. Withdrawals, also called leakages, are flows of income that are diverted out of the circular flow of income rather than being passed on as spending on domestic output. The three withdrawals are saving, taxation, and spending on imports, each removing income from the domestic economy.
When total withdrawals exceed total injections of investment, government spending, and exports, national income tends to fall. Equilibrium national income occurs where planned withdrawals equal planned injections.
This term belongs to The Circular Flow of Income in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
Want to use leakages for marks in the exam? Learn it in class or message the team.