In the Keynesian framework, the paradox of thrift states that:
A. An increase in saving by all individuals may lead to a fall in aggregate income and saving
B. Saving always equals investment automatically
C. An increase in saving by all individuals leads to higher aggregate saving and income
D. Thrift is always beneficial for economic growth
Answer: Option A
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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