Suppose that the Canadian economy is in a severe recession.Most households are trying to save more of their income than before.This increase in private savings will lead to:

Question

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When households try to save more during a recession, it means they are reducing their consumption of goods and services. This decrease in consumer spending can lead to a reduction in business investment and ultimately lead to a decrease in real GDP. This is because the majority of economic activity is driven by consumer spending, and if people are spending less, businesses have less revenue to invest in production and employment. Therefore, an increase in private savings during a recession can be detrimental to the economy's recovery.

Suppose That the Canadian Economy Is in a Severe Recession