Question

Suppose a report on CNN says that the United States is heading into a recession. As a result, Bert's family, as well as many other like-minded families and individuals, reduces their spending and instead fills up their savings accounts for potential hard times.As a result of this behavior, In macroeconomics, this result is known as ____

Answer 1

Answer: The paradox of thrift

Explanation: In simple words, paradox of thrift refers to a situation when in recession the individuals in the economy stops spending and starts saving more. This behavior further results in decrease in demand and hindrance in economic growth.

In the given case, many families starts saving more due to a report from the CNN that a recession is coming ahead.

Hence from the above we can conclude that the correct answer is paradox of thrift.