An interesting paradox called the “Paradox of Thrift” arises when households become concern about their future and attempt to increase their saving. As a consequence of such action the overall economy will suffer. Explain. Do you agree with this assessment?
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Paradox of thrift is a situation whereby people tend to increase on their saving during recession which eventually causes a decrease in overall demand for commodities and also reduce economic development (Huo and Ríos-Rull, 2012). This theory assumes that prices do not change and producers do not adapt to modifying conditions. It was made popular by John Maynard Keynes, who was an economist, with the theory that spending more, saving less and taking more risks is the best reaction…..
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