Why are imports, which bring goods into a country, considered a leakage factor? Imports do not generate domestic income. Domestic industry loses ground as imports increase. Imports are taxed heavily, which is a secondary leakage factor. The money paid to producers of imports leaves the country.

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Social Studies

Carl Moss

5 January, 15:03

Why are imports, which bring goods into a country, considered a leakage factor? Imports do not generate domestic income. Domestic industry loses ground as imports increase. Imports are taxed heavily, which is a secondary leakage factor. The money paid to producers of imports leaves the country.

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Edgar Mayo · Answer 1

Imports, which bring goods into a country are considered a leakage factor because the money paid to producers of imports leaves the country. The term leakage denotes the outflow from a circular flow of income model. Leakage occurs when income is removed by taxes, savings and imports.