Related to the Economics in Practice on p. 476: According to the "paradox of thrift," increased efforts to save will cause a(n)
A) increase in income and an increase in overall saving.
B) increase in income but no overall change in saving.
C) decrease in income and an overall decrease in saving.
D) decrease in income but an increase in saving.

Question

Quizplus · Accepted Answer

According to the paradox of thrift, when individuals increase their efforts to save, it leads to a decrease in overall spending in the economy, which, in turn, causes a decrease in overall income and a decrease in overall saving. This is because reduced spending leads to lower demand for goods and services, which can result in businesses reducing their production and ultimately laying off workers, causing a negative chain reaction throughout the economy.

Related to the Economics in Practice on P