Question:
What is the meaning of the 'Paradox of Thrift'?
What is the meaning of the 'Paradox of Thrift'?
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The Paradox of Thrift suggests that individual thriftiness can negatively impact the overall economy if it reduces consumption and aggregate demand.
Updated On: Nov 5, 2025
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Solution and Explanation
The Paradox of Thrift refers to the situation where an increase in saving by individuals leads to a decline in aggregate demand and economic growth, ultimately reducing overall savings in the economy. This paradox highlights the counterintuitive outcome that saving more can lead to less income and savings on a macroeconomic scale.
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