Advertisements
Advertisements
Question
Explain ‘Paradox of Thrift’.
Advertisements
Solution
Paradox of thrift refers to a situation in which people tend to save more money, thereby leading to a fall in the savings of the economy as a whole. In other words, when everyone increases his/her saving-income proportion i.e. MPS (s), then, the aggregate demand will fall as consumption decreases. This will further lead to a decrease in employment and income level and finally this will reduce the total savings for the economy. This concept was suggested by Keynes wherein increased saving at individual levels will gradually lead to the slowdown of economy in terms of circular flow of income.
APPEARS IN
RELATED QUESTIONS
What is the cause of the Keynesian perfectly elastic Aggregate Supply curve?
If MPC = 1, the value of the multiplier is ______
IF MPC = 0.5, then Multiplier (k) will be ______
The multiplier can be expressed as ______
Which factor affects Keynesian Multiplier?
If MPC = 0.5, then multiplier (K) will be ______
The theory of employment multiplier was propounded by ______
"The Government has raised the exemption limit for the payment of Income tax from ₹ 2 lakh to ₹ 2.5 lakh."
If the situation of deficient demand is prevailing in the economy, what will be the impact of this action taken by the government?
In the absence of indirect taxes or subsidies, the total factor payments (wages, interest, rent and profit) in an economy are equal to:
National income is equal to:
The increase in equilibrium income is more than proportionate to the initial increase in autonomous expenditure because of:
Starting from an autonomous expenditure increase of 10 with MPC = 0.8, the successive increments in output across rounds follow the sequence:
The sum of the infinite geometric series \[10\{1 + 0.8 + (0.8)^2 + \ldots\}\] is:
The investment multiplier is given by the formula:
In the investment multiplier formula, ΔY denotes:
In the investment multiplier formula, ΔĀ represents:
In the multiplier formula \[K=\frac{1}{1-c}\], the symbol c represents:
If the marginal propensity to save (s) is 0.25, the investment multiplier equals:
