Question

paradox of saving and investment​

Answer 1

Answer:

The paradox of thrift (or paradox of saving) is a paradox of economics. The paradox states that an increase in autonomous saving leads to a decrease in aggregate demand and thus a decrease in gross output which will in turn lower total saving. The paradox is, narrowly speaking, that total saving may fall because of individuals' attempts to increase their saving, and, broadly speaking, that increase in saving may be harmful to an economy.[1] Both the narrow and broad claims are paradoxical within the assumption underlying the fallacy of composition, namely that which is true of the parts must be true of the whole. The narrow claim transparently contradicts this assumption, and the broad one does so by implication, because while individual thrift is generally averred to be good for the economy, the paradox of thrift holds that collective thrift may be bad for the economy.

It had been stated as early as 1714 in The Fable of the Bees,[2] and similar sentiments date to antiquity.[3][4] It was popularized by John Maynard Keynes and is a central component of Keynesian economics. It has formed part of mainstream economics since the late 1940s.

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