Which of the Following Is (Are) True Regarding the Paradox

question 179

Multiple Choice

Which of the following is (are) true regarding the paradox of thrift? I. People intend to save less but their actions actually lead to an increase in savings.
II) For the paradox of thrift to occur, investment must be positively related to income.
III) The increased savings of households leads to more consumption, income, and output, increasing investment and aggregate savings.

• A) I and II only
• B) II only
• C) II and III only
• D) I, II and III

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Definitions:

Petty Cash Fund

A small amount of cash on hand used for covering minor or incidental expenses within a business.

Petty Cash Receipt

A document used to record small, miscellaneous expenses paid with petty cash funds.

Cash Equivalents

Short-term, highly liquid investments that are easily convertible into a known amount of cash and close to their maturity.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities.