Question
Why are imports, which bring goods into a country, considered a leakage factor?
A: Imports do not generate domestic income.
B: Domestic industry loses ground as imports increase.
C: Imports are taxed heavily, which is a secondary leakage factor.
D: The money paid to producers of imports leaves the country.
A: Imports do not generate domestic income.
B: Domestic industry loses ground as imports increase.
C: Imports are taxed heavily, which is a secondary leakage factor.
D: The money paid to producers of imports leaves the country.
Answers
GPT-4o mini
The correct answer is **D: The money paid to producers of imports leaves the country.**
Imports are considered a leakage factor because when goods are brought into a country from abroad, the money used to purchase those goods often flows out of the domestic economy to foreign producers. This can reduce the overall money circulating within the domestic economy, which is why it is viewed as a leakage from the economic system.
Imports are considered a leakage factor because when goods are brought into a country from abroad, the money used to purchase those goods often flows out of the domestic economy to foreign producers. This can reduce the overall money circulating within the domestic economy, which is why it is viewed as a leakage from the economic system.