Saving Is a Leakage from the Circular Flow

question 285

Essay

Saving is a leakage from the circular flow. Why didn't the classical economists think saving might cause consumption expenditures to fall short of total output?

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Definitions:

Flotation Costs

The costs associated with issuing new securities, including underwriting, legal, and registration fees.

Retained Earnings

The portion of net income that is retained by the corporation rather than distributed to its shareholders as dividends.

Constant Dividend

A policy of distributing a fixed amount of dividend per share to shareholders, regardless of the company's earnings variations over time.

Cost of Retained Earnings

This represents the opportunity cost for a company of using its retained earnings for investment purposes rather than distributing them as dividends.