Answer to Question #308054 in Macroeconomics for BUSI

Question

Which of the following statements is/are incorrect in explaining the tax being treated as leakage in the circular flow of income between household and firms?

a) Tax is the part of income that is received by households but then paid to government.

b) Tax is taken out of the circular flow of income.

c) Households can spend it on goods and services.

d) Tax is an amount that is withdrawn or leaked from the circular flow of income.

Answer 1

C).Households can spend it on goods and services.