Assertion (A): What is good for one household, saving more, can be bad for the economy as a whole.
Reason (R): If all households cut consumption together, aggregate demand and income fall.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

One household's extra saving does not change national income, but everyone's does. R explains A.

Concept: Fallacy of composition
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsThe paradox of thrift

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Assertion (A): What is good for one household, saving more, can be bad for the economy as a whole.Reason (R): If all households cut consumption together, aggregate demand and income fall.

Explanation

Assertion (A): What is good for one household, saving more, can be bad for the economy as a whole.
Reason (R): If all households cut consumption together, aggregate demand and income fall.