The paradox of thrift occurs when:
A)an increase in saving raises output.
B)an increase in saving reduces output.
C)saving is unrelated to output.
D)a decrease in saving reduces output.

Question

Quizplus · Accepted Answer

The paradox of thrift suggests that while saving is beneficial for an individual, if everyone increases their saving simultaneously, it can lead to a decrease in aggregate demand, which in turn reduces output and income levels in the economy.

The Paradox of Thrift Occurs When