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The equilibrium in the leakage-injection graph is where saving is equal to investment:
I=S. Should firms produce more an unintended saving would be present in the form of inventory accumulation. Should firms produce less, dissaving would occur in the form of inventory depletion.
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Many modern automobiles are equipped with vapor recirculation devices: what is lost to gasoline evaporation in the tank and carburetor is returned to the engine with that device so that the motor does not lose power. A similarity can be established with the circular fund flow model. |
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