Which of the following are true-
a) When Indians buy foreign goods, this spending escapes as a leakage from the circular flow of income decreasing aggregate demand.
b) Indian exports to foreigners enter as an injection into the circular flow, increasing aggregate demand for goods produced within the domestic economy.

Both a and b are true

The correct answer is Option 1: Both a and b are true

Injection means addition to the circular flow whereas, leakage means when flow of income is pulled out of the flow.

Let's examine each statement:

a) When Indians buy foreign goods, this spending escapes as a leakage from the circular flow of income decreasing aggregate demand. True. When domestic consumers spend on foreign goods, this expenditure represents a leakage from the circular flow of income because it does not contribute to domestic economic activity. It reduces aggregate demand within the domestic economy since the money spent on foreign goods does not circulate back into the domestic economy.

b) Indian exports to foreigners enter as an injection into the circular flow, increasing aggregate demand for goods produced within the domestic economy. True. When India exports goods, it results in an inflow of income from foreign buyers, which is an injection into the domestic economy. This increases aggregate demand for domestically produced goods and services.