Question

When an individual buys foreign goods, this spending is known as ........

• A. Injection in the economy
• B. Exchange rate market
• C. Leakages from economy
• D. Direct investment

Hint:

Imports are leakages; exports are injections in the circular flow of income.

Answer 1

The Correct Option is C

Step 1: Recall concept of circular flow of income.
- Injections: Additions to the economy (investment, exports, government spending).
- Leakages: Withdrawals from the economy (savings, taxes, imports).
Step 2: Apply to imports.
When an individual buys foreign goods, money flows out of the domestic economy into another country. This reduces domestic demand and is treated as a leakage.
Step 3: Eliminate wrong options.
- (A) Injection → opposite of leakage.
- (B) Exchange rate market → refers to forex trading.
- (D) Direct investment → cross-border asset acquisition, not imports.
Final Answer: \[ \boxed{\text{Leakages from economy}} \]