The paradox of thrift explains that increased savings by households could actually lower savings for the economy as a whole.

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The paradox of thrift asserts that if households decide to save more money during a recession or economic downturn, spending may slow down, harming the overall economy and resulting in lower savings for the economy as a whole. This happens because if everyone saves more, there is less demand for goods and services, which can lead to falling company profits and lower employment levels, among other consequences.

The Paradox of Thrift Explains That Increased Savings by Households