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Leakages to the multiplier refer to the ways in which income generated in an economy does not circulate back into the local economy, thus reducing the overall impact of the initial spending. Key leakages include savings (when consumers save rather than spend), taxes (government collection that does not return to the economy immediately), and imports (money spent on goods and services from outside the local economy). These leakages can diminish the effectiveness of fiscal policies aimed at stimulating economic growth.

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3mo ago

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