Leakage

AAA

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 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.

RELATED TERMS
  1. Whisper Number

    1. Traditionally, the unofficial and unpublished earnings per ...
  2. Insider

    A director or senior officer of a company, as well as any person ...
  3. Press Release

    News that is sent out or released by the company making the news. ...
  4. Public

    A reference to anything that can be possessed or freely researched ...
  5. Welfare Capitalism

    Definition of welfare capitalism.
  6. LIBOR

    LIBOR or ICE LIBOR (previously BBA LIBOR) is a benchmark rate ...
Related Articles
  1. Eyeing China? Consider These Economic ...
    Economics

    Eyeing China? Consider These Economic ...

  2. How A Limited Government Affects A Country's ...
    Economics

    How A Limited Government Affects A Country's ...

  3. The Best 4 Places To Invest In Latin ...
    Economics

    The Best 4 Places To Invest In Latin ...

  4. Macroeconomics
    Economics

    Macroeconomics

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center