Leakage

DEFINITION of 'Leakage'

A situation in which capital, or income, exits an economy, or system, rather than remains within it. In economics, leakage refers to outflow from a circular flow of income model. In a two sector model, all individual income is sent back to employers when goods and services are purchased, and back to employees through wages and dividends. Leakage occurs when income is taken out through taxes, savings and imports. In retail, leakage refers to consumers who spend money outside of the local market.



Leakage may also refer to the release of private information prior to it being released to the public.

BREAKING DOWN 'Leakage'

The exit of money from the economy through leakage results in a gap between what is supplied and what is demanded. If consumers spend their income outside of their community or country, then businesses must look elsewhere to make up for the loss of funds. In Keynesian economics, governments may have to inject cash into the system if leakage causes a shortage of capital.

RELATED TERMS
  1. Whisper Number

    1. Traditionally, the unofficial and unpublished earnings per ...
  2. Press Release

    News that is sent out or released by the company making the news. ...
  3. Insider

    A director or senior officer of a company, as well as any person ...
  4. Public

    A reference to anything that can be possessed or freely researched ...
  5. Tight Monetary Policy

    A course of action undertaken by the Federal Reserve to constrict ...
  6. Consumer Confidence Index - CCI

    A survey by the Conference Board that measures how optimistic ...
Related Articles
  1. Fundamental Analysis

    3 Times the FOMC Got It Right This Century

    Learn about three times that the Federal Open Market Committee (FOMC) and the Federal Reserve took positive steps to help the economy in the 21st century.
  2. Fundamental Analysis

    Quantitative Easing Report Card in 2016

    Find out why quantitative easing has not worked, despite the best efforts of the Federal Reserve, and how it has fueled the national debt problem.
  3. Investing News

    How Interest Rates Can Go Negative

    Central banks from Europe to Japan have implemented a negative interest rate policy (NIRP) in order to stimulate economic growth.
  4. Economics

    The Delicate Dance of Inflation and GDP

    Investors must understand inflation and gross domestic product, or GDP, well enough to make decisions without becoming buried in data.
  5. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  6. Forex

    The Consumer Price Index

    Find out how this economic measure can help you make key financial decisions.
  7. Economics

    Understanding the History of Money

    Money has been a part of human history for at least 3,000 years, evolving from bartering to banknotes.
  8. Economics

    How Interest Rates Affect The U.S. Markets

    When indicators rise more than 3% a year, the Fed raises the federal funds rate to keep inflation under control.
  9. Investing News

    Global Headwinds Hit the 6 Biggest Economies

    As of Friday, initial estimates for fourth-quarter and full-year 2015 growth in gross domestic product (GDP) are available for five of the world's six largest national economies, and for the ...
  10. Economics

    The Ripple Effect: Interest Rates and the Stock Market

    Investors should observe the Federal Reserve’s funds rate, which is the cost banks pay to borrow from Federal Reserve banks.
RELATED FAQS
  1. What is comparative advantage?

    Comparative advantage is an economic law that demonstrates the ways in which protectionism (mercantilism, at the time it ... Read Full Answer >>
  2. How does the Wall Street Journal prime rate forecast work?

    The prime rate forecast is also known as the consensus prime rate, or the average prime rate defined by the Wall Street Journal ... Read Full Answer >>
  3. What's the difference between microeconomics and macroeconomics?

    Microeconomics is generally the study of individuals and business decisions, macroeconomics looks at higher up country and ... Read Full Answer >>
  4. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  5. Marginal propensity to Consume (MPC) Vs. Save (MPS)

    Historically, because people in the United States have shown a higher propensity to consume, this is likely the more important ... Read Full Answer >>
  6. Is Japan an emerging market economy?

    Japan is not an emerging market economy. Emerging market economies are characterized by low per capita incomes, poor infrastructure ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center