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Income Determination & the Multiplier · Question 54 of 58

Question 54

MediumOriginal question

The paradox of thrift says that if everyone in an economy tries to save more,

Options for question 54

Show the answer and explanation
CorrectNot quiteAnswer A

Correct answer: A

Explanation

  1. More saving means less consumption, so AD and income fall.

  2. At the lower income, saving is back to equal planned investment, which has not changed.

Concept
Paradox of thrift
Typical time
70 s
Your time
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The rule this testsThe paradox of thrift
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Ten questions from Income Determination & the Multiplier, at your own pace.

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Ten questions from Income Determination & the Multiplier, at your own pace.

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