The paradox of thrift will not arise if:
A)increases in saving are translated into identical increases in investment.
B)increases in saving are translated into identical decreases in consumption.
C)decreases in saving are translated into identical increases in investment.
D)decreases in saving are translated into identical decreases in consumption.

Question

Quizplus · Accepted Answer

The paradox of thrift suggests that when everyone saves more during times of recession, aggregate demand will fall, leading to a decrease in economic growth. However, if increases in saving are translated into identical increases in investment, the total demand remains unchanged, preventing the paradox from arising.

The Paradox of Thrift Will Not Arise If