Which best describes why taxes and savings are considered leakage factors?

Question

A: They take money out of households.
B: They take money out of the economic system.
C: They take money out of the economic sectors.
D: They take money out of the financial sector.

Answer 1

The best answer is:

B: They take money out of the economic system.

Taxes and savings are considered leakage factors because they represent money that flows out of the immediate cycle of spending and investment within the economy, thus reducing the overall money available for consumption and production in the economic system.