The paradox of thrift does not exist in the long run because
A)aggregate supply has an impact on real GDP only in the short run.
B)changes in aggregate demand have no impact on real GDP in the long run.
C)potential output is determined by changes in the price level.
D)not everyone increases saving in the long run.
E)everyone increases consumption in the long run.

Question

Quizplus · Accepted Answer

In the long run, the economy is at full employment, and changes in aggregate demand only affect the price level, not real GDP, due to the economy's self-correcting mechanism.

The Paradox of Thrift Does Not Exist in the Long