If all of the households and businesses start saving more during economic hard times, then aggregate income will fall, hurting everyone in the economy. This is known as:

Question

Quizplus · Accepted Answer

The paradox of thrift states that if everyone tries to save more during economic hard times, then aggregate income will fall, causing a reduction in consumption and output, ultimately harming everyone in the economy. This is because one person's spending is another person's income, so if everyone tries to save, there will be less spending and less income overall. The other answer choices are not relevant to this concept.

If All of the Households and Businesses Start Saving More