After Studying the Circular Flow of Dollars in the Economy

question 157

Essay

After studying the circular flow of dollars in the economy, explain with an example how saving done by households goes back into the circular flow. In reality, is all household saving used as investment?

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Definitions:

Conditioned Response

A response acquired through learning to a stimulus that was once neutral but has become associated with an unconditioned stimulus due to repeated pairings.

Surge of Excitement

An intense, sudden feeling of exhilaration or euphoria, often experienced in response to a stimulating event or anticipation of one.

Unconditioned Stimulus

In classical conditioning, an unconditioned stimulus is something that naturally and automatically triggers a response without any learning needed.

Conditioned Stimulus

A formerly neutral signal that, once linked with the unconditioned stimulus, ultimately induces a conditioned reaction.