What would this do to circular flow of income and spending

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Q. model, as shown, assumes that households spend everything y earn on goods and services produced by firms. Suppose that rather than spending all their earnings, households began hoarding some of their income. Say y store it as cash in a mayonnaise jar in kitchen cabinet. What would this do to circular flow of income and spending? How would businesses react to household hoarding?

Reference no: EM1369219

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