Paradox of Thrift
What is Paradox of Thrift?
When everyone tries to save more at once, total saving may not rise because income falls.
Understanding Paradox of Thrift
Saving more is wise for one household. But if all households cut spending together, businesses sell less, cut jobs and incomes fall, so total saving can end up unchanged or lower.
The idea, popularized by Keynes, explains why falling demand can deepen recessions.