John Maynard Keynes argued that if many households decide at the same time to increase saving and reduce spending
A)this will increase investment spending in the short run and expand the economy in the long run.
B)the economy will benefit in the short run but the effect will not last into 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)they may make themselves worse off by causing aggregate expenditure to fall,thereby pushing the economy into a recession.

Question

Quizplus · Accepted Answer

According to Keynes, if many households decide to increase saving and reduce spending, this will decrease aggregate expenditure and cause the economy to enter a recession. This is known as the paradox of thrift, where individual actions to save more can have an adverse effect on the overall economy.

John Maynard Keynes Argued That If Many Households Decide at the Same