Question

Useful Notes on Paradox of Thrift

Answer 1

Savings have different significance for the individual households and the development plan era. An individual household regards the habit of saving a part of its income as a virtue because savings lend him a feeling of security against the unforeseen.For individuals, savings thus provide a protective umbrella against the bad spells. That is why they always stress on savings and spend a great deal of effort on inculcating thriftiness among the young ones in the family. For them, habit of saving, like all other good habits, needs to be inculcated among the youngsters as a part of their up-bringing.

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Answer 2

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.