Leakage

Filed Under » ,
Dictionary Says

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.

Investopedia Says

Investopedia explains '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.

Articles Of Interest

  1. Introduction To Treasury Inflation-Protected Securities (TIPS)

    If you want to protect your portfolio from inflation, all you need are a few TIPS.
  2. Nobel Winners Are Economic Prizes

    Before you try to profit from their theories, you should learn about the creators themselves.
  3. Breaking Down The Balance Of Trade

    The balance of trade is a key indicator of a nation’s health. Investors and market professionals appear more concerned with trade deficits than trade surpluses, since chronic deficits may be ...
  4. Open Market Operations Explained

    The term “open market operations” refers to a monetary policy tool in which central banks buy and sell bonds to regulate the money supply in the economy. The United States employs open market ...
  5. Why High-Income Earners Are Not Safe From The Threat Of Bankruptcy

    Few people have much sympathy for the woes of those earning six figure or more each year. But, given that high-income earners drive economic expansion, the risks and problems facing high earners ...
  6. Market Summary for July 26 2013

    The major U.S. indices moved largely lower this week, with technical indicators suggesting that declines will continue next week, or at least that sideways trading will take hold.
  7. Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  8. The Balance Of Trade

    The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. ...
  9. Tariffs

    Tariffs, or customs duties, are taxes imposed on foreign goods and services. In addition to providing a country with additional revenue, tariffs offer protection to domestic producers. Imported ...
  10. Exploring The Current Account In The Balance Of Payments

    Learn how a country's current account balance reflects the country's economic health.
comments powered by Disqus
Marketplace
Hot Definitions
  1. Network Effect

    A phenomenon whereby a good or service becomes more valuable when more people use it. The internet is a good example...
  2. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  3. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  4. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  5. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  6. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
Trading Center