John Maynard Keynes argued that if many households decide to increase saving and reduce spending at the same time
A)this may benefit the economy in the short run,but not in the long run.
B)the economy will benefit in the short run and benefit by an even greater amount in the long run.
C)this will have a major negative impact on the economy in both the short run and in the long run.
D)this may benefit the economy in the long run,but could be counterproductive in the short run.

Question

Quizplus · Accepted Answer

According to Keynesian economics, if households increase saving and reduce spending, it can lead to a decrease in aggregate demand in the short run, which can cause a recession. However, in the long run, this increase in saving can lead to an increase in investment, which in turn can lead to economic growth. Therefore, while there may be a short-term negative impact, it can be beneficial in the long run.

John Maynard Keynes Argued That If Many Households Decide to Increase