The paradox of thrift is
A) a concern of macroeconomists of all persuasions.
B) a concern of the Keynesian economists that is enlarged if investment is positively correlated with GDP.
C) not a concern of the new classical economists because of their belief that price adjustments always maintain actual GDP at its potential.
D) really a fallacy of logic because higher saving produces higher investment, which produces greater aggregate demand and faster growth.
E) b and c.

Question

Quizplus · Accepted Answer

The paradox of thrift is a concept primarily associated with Keynesian economics, which posits that while saving is beneficial for an individual, if everyone saves more during times of recession, it can lead to decreased aggregate demand, further economic downturn, and thus is counterproductive at the macroeconomic level. This concern is not shared by new classical economists, who believe that price and wage adjustments will automatically correct any discrepancies between actual and potential GDP, negating the paradox.

The Paradox of Thrift Is