The circular flow model of economics shows how money moves through an economy in a constant loop from producers to consumers and back again, factoring into a nation’s GDP.

Leakage is an economic term that describes capital or income that escapes an economy or system in the context of a circular flow of income model. It results in a gap between supply and demand.

Share of Income between Capital & Labor At the top of the circular flow is the relationship between how much of national income goes to capital and labor.