I have a question regarding the interesting paradox called the "Paradox of Thrift", which arises when households become concerned about their future and attempt to increase their savings. As a consequence of such action the overall economy will suffer as a result of these consumers removing money from circulation. Explain. Do you agree with this assessment?© BrainMass Inc. brainmass.com October 10, 2019, 7:38 am ad1c9bdddf
This is based on the belief that more savings initiated by the households will siphon off a significant amount of money circulating in the economy will mean less demand for goods and services. Eventually, this dampened demand will cause the price of goods and services to fall.
This belief is not founded on solid ground. Only the uninitiated will agree with this.
The "Paradox of Thrift" has two (2) limitations:
First, savings will not ...
This is a 250 word analysis of the Paradox of Thrift that discusses two arguments for why it is a fallacy and explains the reason why this fallacy is believed. It includes references.