Question

The "paradox of thrift" refers to the understandable tendency of worried people to ________ their saving, but in aggregate it causes a ________ recession.

A) increase; shorter
B) increase; more severe
C) decrease; less severe
D) increase; less severe
E) decrease, more severe

Answer 1

The 'paradox of thrift' refers to the tendency of worried people to decrease their saving but causing a more severe recession.

Step-by-step explanation:

The 'paradox of thrift' refers to the understandable tendency of worried people to decrease their saving, but in aggregate it causes a more severe recession. When people become uncertain about their economic future, they tend to save more, which leads to a decrease in overall spending in the economy. However, when everyone starts saving more at the same time, it can actually worsen the recession because there is less money circulating in the economy.