Paradox of Thrift

The Paradox of Thrift is an economic concept that suggests that when individuals save more money, it can actually be detrimental to the economy. This is because when people save more money, they are not spending it, which reduces the amount of money circulating in the economy. This can lead to a decrease in economic growth, as there is less money available for businesses to invest in new projects and hire new employees. As a result, the Paradox of Thrift suggests that saving money can be beneficial for individuals, but it can be detrimental to the overall economy.

History of the Term

The Paradox of Thrift was first introduced by the British economist John Maynard Keynes in his 1936 book, The General Theory of Employment, Interest, and Money. In the book, Keynes argued that when individuals save more money, it can lead to a decrease in economic growth. He argued that this was because when people save more money, they are not spending it, which reduces the amount of money circulating in the economy. As a result, businesses have less money to invest in new projects and hire new employees, leading to a decrease in economic growth.

Comparisons

Summary

The Paradox of Thrift is an economic concept that suggests that when individuals save more money, it can actually be detrimental to the economy. This is because when people save more money, they are not spending it, which reduces the amount of money circulating in the economy. As a result, businesses have less money to invest in new projects and hire new employees, leading to a decrease in economic growth. For more information on the Paradox of Thrift, you can visit websites such as Investopedia, The Balance, and The Economist.

See Also

• Keynesian Economics
• Aggregate Demand
• Aggregate Supply
• Inflation
• Deflation
• Recession
• Economic Growth
• Monetary Policy
• Fiscal Policy
• Supply-Side Economics

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