Answer to Question #131450 in Macroeconomics for Bokang

Question

Taxes are a leakage or withdrawal from the flow of income and spending in
the economy;

Answer 1

Withdrawals are variables in the economic system that is responsible for leaking out of the circular flow of national income thus reducing the size of the national income and they include savings, imports and as well as taxation. They are non-consumption uses of income in the economy. Where savings are part of income that is put aside for future spending. In addition, imports are part of incomes spent on foreign-made goods and services. Finally, taxation are part incomes that is paid directly to the government in form of taxes as shown by the figure below.