Breaking the circular flow:(poverty circular):-

Innovation in the from of a new product  by an entrepreneur for the purpose of earning profits .in order to break the circular flow, the innovation  is risky, they must pay interest  on it. Once the new innovation becomes successful and profitable, innovation is one field may induce other innovation in related fields.

 
Since investment is assumed to be financed by creation of bank credit, it increases money income and prices and helps to create a cumulative expansion throughout the economy .with the increase in the purchasing power of the consumers, the demand for the products of the old industries increases in relation to supply. Prices rise, profits increase and old industries expand by borrowing from the banks. It induces a secondary wave of credit inflation which is superimposed on the primary wave of innovation. Over optimism and speculation add further to the boom. After a period of gestation the new products starts appearing in the market displacing the old products and enforcing a process of liquidation, re adjustment and absorption . the demand for the old products is decreased. Their prices fall. The old firms contracts out put and some are even forced to run into liquidation. As  the innovators start repaying bank loans out of profits, the quantity of money is decreased and prices tend to fall. Profits decline. Uncertainty and risk increase, the impulse for innovation is reduced and eventually comes to an end. Depression ensues.

 
Economist believes in the existences of the Kondratieff long wave of upswings and downswing in economic activity. Each long wave of upswing is brought about by an innovation in the from of a new product which leads to further innovation in the methods of production, new forms of business organization. new  sources of supply of raw materials and intermediate products and new markets. thus there is abundance of goods available for the masses. Mass production means production for the masses. once the upswings ends, the long wave downswings begins and the painful process of readjustment. Ultimately the natural forces of recovery bring about a revival.