CLEP Principles of Macroeconomics Exam Prep

Answer - C - Consumer savings are considered a leakage in the circular flow of money.

Key Takeaway: The circular flow of money within an economy is an economic model that explains how money moves between consumers and producers. Within this flow, for example, a worker is paid a wage and he or she uses a large fraction of that wage on living expenses such as rent and utilities. Goods and services are also purchased from those wages. If the worker decides to save, that amount is considered a leakage from the circular flow as it does not move back to the producers.