Which statement(s) is/are TRUE regarding the paradox of thrift? I. People intend to save less but their actions actually lead to an increase in savings.
II) For the paradox of thrift to occur, investment must be positively related to income.
III) The increased savings of households leads to more consumption, income, and output, increasing investment and aggregate savings.
A) I and II only
B) II only
C) II and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

The paradox of thrift suggests that increased savings can lead to a decrease in aggregate demand, reducing income and thus overall savings, not an increase. For the paradox to occur, investment must be positively related to income.

Which Statement(s) Is/are TRUE Regarding the Paradox of Thrift? I