Question

Saving is a leakage in the sense that:______.

a. saving is lost to the economy and ultimately leads to stagnation.
b. it often accompanies a trade deficit.
c. consumers spend less than their total income.
d. the financial system often makes negative profits.

Answer 1

The correct option is c. consumers spend less than their total income.

Step-by-step explanation:

Saving is simply a portion of the total income that is not spent by the consumers on goods and services.

Saving is a non-consumption use of income which is leaked out of the circular flow of income and expenditure. Saving therefore makes the consumption lower than the total income.

Based on the explanation above, the correct option is c. consumers spend less than their total income.