Question

If all of the households and businesses start saving more during economic hard times, then aggregate income will fall, hurting everyone in the economy. This is known as:

a. the paradox of thrift.
b. the crowding-out theory.
c. the quantity theory.
d. the permanent income hypothesis.

Answer 1

a. the paradox of thrift.

Step-by-step explanation:

The paradox of thrift posits that personal saving would have a negative impact on the economy during a recession.

It was popularised by John Maynard Keynes.

He was of the opinion that spendings instead of saving should increase in a recession as consumption drives economic growth.

I hope my answer helps you