The idea that an increase in savings can lead to a reduction in consumer spending and total spending - which leads to fewer jobs, less income, and lower savings - is known as:
A) countercyclical saving.
B) Keynesian bartering.
C) spending neutralization.
D) the paradox of thrift.

Question

Quizplus · Accepted Answer

The paradox of thrift is a concept in Keynesian economics that suggests when individuals collectively increase their savings during a recession, it leads to a decrease in aggregate demand, which can further deepen the recession by reducing consumption, income, and ultimately savings itself.

The Idea That an Increase in Savings Can Lead to a Reduction