1/1/23, 2:50 PM W5: Paradox of Thrift – ECON102 D005 Fall 2022
https://myclassroom.apus.edu/d2l/le/72745/discussions/topics/632699/View 1/3
W5: Paradox of Thrift
Rubrics
ECON Forum Rubric v2.0
Start a New Thread
Filter by:
Sort by:
Most Recent Activity
ECON102 D005 Fall 2022 LE
Discussions List View Topic Settings Help
Search W5: Paradox of Thrift
Subscribe
Week 5 Discussion Post 4
An interesting paradox called the “Paradox of Thrift” arises when householdsbecome concern about their future and attempt to increase their saving. As aconsequence of such action the overall economy will suffer. Explain. Do youagree with this assessment?
Your initial discussion posts must be submitted by midnight, Day 3 and then yourresponses to 2 of your classmates’ posts by have to be submitted by midnight,Day 7.
All Threads
Week 5 Discussion post 4Jonathan Malcolm posted Jan 1, 2023 3:07 PM Subscribe
Hello class,
1/1/23, 2:50 PM W5: Paradox of Thrift – ECON102 D005 Fall 2022
https://myclassroom.apus.edu/d2l/le/72745/discussions/topics/632699/View 2/3
0Unread
0Replies
0Views
The paradox of thrift which is people gaining concern for the future so they look to save all
the money they can. This will definitely have a negative impact on the overall economy. If
you think about all the money you would be saving, that money is someone else's lost
income. Small businesses would be suffering to stay afloat, and yes while you would be
keeping more money for yourself it would hurt the economy. I understand you can't spend
everything you make, while that's not good for yourself but not spending any of could even
go as far as causing these smaller businesses to go under and create rises in the
unemployment rates.
"John Maynard Keynes, who published his influential work, The General Theory of Employ –
ment, Interest, and Money, in 1936, noted saving can ultimately be detrimental to the
economy because of the paradox of thrift. This theory argues that if everyone individually
cuts spending to increase saving, aggregate saving will eventually fall because one person's
spending is someone else's income."
This can also cause such a snowball effect because if I'm saving all my money, causing
others to lose out on income. They will in turn have to save their money to make up for the
lost income of me saving my money and so on and so on. Causing a much bigger effect on
the economy as a whole.
Vermann, E. Katarina. “‘Wait, Is Saving Good or Bad? the Paradox of Thrift.’” EconomicResearch – Federal Reserve Bank of St. Louis, May 2012,
https://research.stlouisfed.org/publications/page1-econ/2012/05/01/wait-is-saving-good-
or-bad-the-paradox-of-thrift/.
-Jonathan
less
WK5 DBBernard Vinson posted Jan 1, 2023 10:57 AM Subscribe
Hello Class,
During the pandemic, people saved more money and had less credit card debt. Nearly $4
trillion was saved. (Frank, 2021) Saving money gives people a sense of comfort in knowing
they have money stashed away. With this comes the Paradox of thrift. This is when saving
1/1/23, 2:50 PM W5: Paradox of Thrift – ECON102 D005 Fall 2022
https://myclassroom.apus.edu/d2l/le/72745/discussions/topics/632699/View 3/3
/ 1
0Unread
0Replies
0Views
more during an economic recession, leading to a fall in aggregate demand and economic
growth. Such a situation harms everyone as investments give lower returns than average.
(What Is Paradox of Thrift? Definition of Paradox of Thrift, Paradox of Thrift Meaning,
2022) Although a person decides to save or cut back on expenses from a particular
merchant, the money could go toward a different seller. For example, if I cut back on eating
out to save money for a vacation, the money will be saved but put towards other means in
return. The economy will not suffer from the Paradox of thrift because it allows people to
save money and spend it on wanted things with more money to do so, which in return will
grow the economy.
Reference:
Frank, R. (2021, August 4). Most of America’s extra savings during the pandemic are goingto the wealthy. CNBC. https://www.cnbc.com/2021/08/03/most-of-americas-extra-
pandemic-savings-are-going-to-the-wealthy-.html
What is Paradox Of Thrift? Definition of Paradox Of Thrift, Paradox Of Thrift Meaning.
(2022, December 27). The Economic Times.
https://economictimes.indiatimes.com/definition/paradox-of-thrift
less
1
