In the Keynesian framework, the paradox of thrift states that:
A. Saving always equals investment automatically
B. An increase in saving by all individuals may lead to a fall in aggregate income and saving
C. Thrift is always beneficial for economic growth
D. An increase in saving by all individuals leads to higher aggregate saving and income
Answer: Option B
Solution (By JKSSB Mock Tests)
The paradox of thrift argues that if everyone tries to save more during a recession, aggregate demand falls, leading to lower income and ultimately lower total saving.
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