The Paradox of Thrift Is the Idea That an Increase

question 18

Multiple Choice

The paradox of thrift is the idea that an increase in savings can cause:

• A) an increase in GDP and income, which reduces the need for savings.
• B) a drop in GDP and income, which leads to a drop in savings.
• C) an increase in spending due to the interest earned on the savings.
• D) a decrease in spending, which causes interest rates to rise.

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Definitions:

Phonological Loop

A component of the working memory model that deals with auditory information and preserves the order of this information.

Visuospatial Sketchpad

A component of working memory responsible for the manipulation and temporary storage of visual and spatial information.

Working Memory

An intellectual system with restricted capability tasked with momentarily maintaining information for processing purposes.

Working Memory

A mental mechanism designed for briefly maintaining data for processing and adjustment.