When everybody saves their money, aggregate savings decrease. This is an example of
A) the Zero Sum Scenario.
B) the Fallacy of Combination.
C) the Kobayashi Maru Scenario.
D) Say's Law.
E) the Paradox of Thrift.

Question

Quizplus · Accepted Answer

The situation described is known as the Paradox of Thrift, where individual decisions to save money can actually lead to a decrease in aggregate savings and a decline in economic activity. This happens because when everyone saves, there is less spending, which in turn reduces business revenue and leads to job losses and decreasing incomes.

When Everybody Saves Their Money, Aggregate Savings Decrease