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What is Understanding the Paradox of Thrift about?

The paradox of thrift states that if households increase their savings, it can decrease aggregate demand and gross output. While households aim to save more, the resulting drop in spending leads to a drop in income. This lower income then means the overall level of savings does not change from the initial level, despite efforts to increase it. The paradox is that individual efforts to save more can end up having no effect on total savings in the economy.

Author

Fiqri

Language

EN