Answer to Question #273763 in Macroeconomics for minma

Question

When households attempt to increase saving but end up by saving no more than before the attempt, they have encountered:

Answer 1

Solution:

The households have encountered the paradox of thrift.

 

The paradox of thrift is an economic theory that contends that personal savings can harm overall economic growth. It is based on the economy's circular flow, in which current spending drives future spending. It advocates for interest rate cuts to stimulate spending during an economic downturn.