Explain 'Paradox of Thrift'. Hint: The 'Pardox of Thrift' is an economic theory, propounded by J.M Keynes. Accordings to Keynes, when people start saving money instead of spending it, in response to growing cercons about a recession, they actually make the recession worse Rise in MPS means a fall in MPC. When MPC falls, aggregate consumptions in the economy falls. It leads to rise in inventory of producers. To clear the unwanted increase in inventory, firms would plan to reduce the production. It will reduce the demand for factor services and factor incomes. As a result the total volume of saving genreated in the economy would fail (or remain unchanged). This theory is referred as a paradox because the theory seems to be beneficial, but is actually deterimental(disadvantageous) for the economy.

Explain 'Paradox of Thrift'. Hint: The 'Pardox of Thrift' is an econom

1.	Explain 'Paradox of Thrift'. Hint: The 'Pardox of Thrift' is an economic theory, propounded by J.M Keynes. Accordings to Keynes, when people start saving money instead of spending it, in response to growing cercons about a recession, they actually make the recession worse Rise in MPS means a fall in MPC. When MPC falls, aggregate consumptions in the economy falls. It leads to rise in inventory of producers. To clear the unwanted increase in inventory, firms would plan to reduce the production. It will reduce the demand for factor services and factor incomes. As a result the total volume of saving genreated in the economy would fail (or remain unchanged). This theory is referred as a paradox because the theory seems to be beneficial, but is actually deterimental(disadvantageous) for the economy.
Answer» <html><body><p></p>Solution : The 'Pardox of Thrift' is an economic <a href="https://interviewquestions.tuteehub.com/tag/theory-706806" style="font-weight:bold;" target="_blank" title="Click to know more about THEORY">THEORY</a>, propounded by J.M Keynes. Accordings to Keynes, when <a href="https://interviewquestions.tuteehub.com/tag/people-1150079" style="font-weight:bold;" target="_blank" title="Click to know more about PEOPLE">PEOPLE</a> start saving money instead of spending it, in <a href="https://interviewquestions.tuteehub.com/tag/response-1187068" style="font-weight:bold;" target="_blank" title="Click to know more about RESPONSE">RESPONSE</a> to growing concerns about a recession, they actually make the recession worse <br/> .Rise in MPS means a fall in MPC. When MPC falls, aggregate consumption in the economy falls. It leads to rise in inventory of producers. To clear the unwanted <a href="https://interviewquestions.tuteehub.com/tag/increase-1040383" style="font-weight:bold;" target="_blank" title="Click to know more about INCREASE">INCREASE</a> in inventory, firms would plan to reduce the production. It will reduce the demand for factor services and factor incomes. As a result the total volume of saving generated in the economy would fall (or remain unchanged). <br/> This theory is <a href="https://interviewquestions.tuteehub.com/tag/referred-7264329" style="font-weight:bold;" target="_blank" title="Click to know more about REFERRED">REFERRED</a> as a paradox because the theory seems to be beneficial, but is actually deterimental(disadvantageous) for the economy.</body></html>

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