Identify the example which is not considered as Leakage in circular flow of Income and also affecting the balance of payment of an economy.

Export of invisible items.

The correct answer is option (2) : Export of invisible items.

Leakages are referred to as the non consumption uses of the income and examples of leakage are savings, taxes and imports.

Export of invisible items: This includes services exported to other countries, such as software services, tourism earnings, etc. It is an injection as it brings in foreign exchange earnings.

• Import of visible items: This involves goods purchased from foreign countries, which is a leakage as it involves spending on foreign goods.

• Taxes on foreign direct investment: Taxes on foreign direct investment represent a leakage as they are a portion of income earned by foreign companies that is taken out of the economy.

• Foreign companies sending their corporate savings: This represents a leakage because it involves savings being sent out of the economy to the parent company abroad.