{"id":90869,"date":"2025-06-01T10:39:17","date_gmt":"2025-06-01T10:39:17","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=90869"},"modified":"2025-06-01T10:39:17","modified_gmt":"2025-06-01T10:39:17","slug":"if-all-the-people-of-the-economy-increase-the-proportion-of-income-the","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/if-all-the-people-of-the-economy-increase-the-proportion-of-income-the\/","title":{"rendered":"If all the people of the economy increase the proportion of income the"},"content":{"rendered":"

If all the people of the economy increase the proportion of income they save, the total value of savings in the economy will either decrease or remain unchanged. This phenomenon is known as :<\/p>\n

[amp_mcq option1=”Crowding out” option2=”Crowding in” option3=”Paradox of thrift” option4=”Paradox of prosperity” correct=”option3″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC CAPF – 2023<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
The phenomenon described is known as the Paradox of Thrift (or Paradox of Saving). It is a concept in Keynesian economics stating that if everyone in an economy attempts to increase their saving rate simultaneously, the aggregate demand will fall. This leads to a decrease in production and income. Since aggregate saving depends on income (Saving = propensity to save * income), the fall in income can lead to a decrease in total saving, or at best, no increase, despite individuals trying to save more. The collective outcome is opposite to the individual intention.<\/section>\n
The Paradox of Thrift highlights how increased individual saving efforts can collectively lead to lower overall income and potentially reduced total saving due to decreased aggregate demand.<\/section>\n
Crowding out occurs when increased government borrowing raises interest rates, reducing private investment. Crowding in occurs when government spending stimulates economic activity and encourages private investment. The paradox of thrift applies primarily to economies operating below full employment, where a fall in aggregate demand leads to reduced output.<\/section>\n","protected":false},"excerpt":{"rendered":"

If all the people of the economy increase the proportion of income they save, the total value of savings in the economy will either decrease or remain unchanged. This phenomenon is known as : [amp_mcq option1=”Crowding out” option2=”Crowding in” option3=”Paradox of thrift” option4=”Paradox of prosperity” correct=”option3″] This question was previously asked in UPSC CAPF – … <\/p>\n

Detailed SolutionIf all the people of the economy increase the proportion of income the<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1085],"tags":[1105,1120,1174],"class_list":["post-90869","post","type-post","status-publish","format-standard","hentry","category-upsc-capf","tag-1105","tag-economic-development","tag-national-income-gross-domestic-product","no-featured-image-padding"],"yoast_head":"\nIf all the people of the economy increase the proportion of income the<\/title>\n<meta name=\"description\" content=\"The phenomenon described is known as the Paradox of Thrift (or Paradox of Saving). It is a concept in Keynesian economics stating that if everyone in an economy attempts to increase their saving rate simultaneously, the aggregate demand will fall. This leads to a decrease in production and income. Since aggregate saving depends on income (Saving = propensity to save * income), the fall in income can lead to a decrease in total saving, or at best, no increase, despite individuals trying to save more. The collective outcome is opposite to the individual intention. The Paradox of Thrift highlights how increased individual saving efforts can collectively lead to lower overall income and potentially reduced total saving due to decreased aggregate demand.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/if-all-the-people-of-the-economy-increase-the-proportion-of-income-the\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"If all the people of the economy increase the proportion of income the\" \/>\n<meta property=\"og:description\" content=\"The phenomenon described is known as the Paradox of Thrift (or Paradox of Saving). It is a concept in Keynesian economics stating that if everyone in an economy attempts to increase their saving rate simultaneously, the aggregate demand will fall. This leads to a decrease in production and income. Since aggregate saving depends on income (Saving = propensity to save * income), the fall in income can lead to a decrease in total saving, or at best, no increase, despite individuals trying to save more. The collective outcome is opposite to the individual intention. 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Since aggregate saving depends on income (Saving = propensity to save * income), the fall in income can lead to a decrease in total saving, or at best, no increase, despite individuals trying to save more. The collective outcome is opposite to the individual intention. 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