If the Autonomous consumption of a country reduces it would lead toIncrease in Autonomous savingFall in Equilibrium GDPAll the options are correct.Paradox of thrift
Question
If the Autonomous consumption of a country reduces it would lead toIncrease in Autonomous savingFall in Equilibrium GDPAll the options are correct.Paradox of thrift
Solution
The question seems to be asking about the effects of a reduction in autonomous consumption in a country's economy. Here's a step-by-step breakdown:
-
Increase in Autonomous Saving: When autonomous consumption decreases, it means that households are spending less. This could potentially lead to an increase in autonomous saving, as less spending could mean more saving.
-
Fall in Equilibrium GDP: Autonomous consumption is a component of a country's Gross Domestic Product (GDP). If autonomous consumption decreases, it could lead to a fall in the equilibrium GDP, all other things being equal.
-
All the options are correct: Given the explanations above, it seems that both an increase in autonomous saving and a fall in equilibrium GDP could result from a decrease in autonomous consumption.
-
Paradox of thrift: This is an economic theory that argues that personal savings can be detrimental to overall economic growth. It's called a paradox because while saving is typically good for individuals, when everyone increases their savings, it can lead to decreased consumption and, in turn, decreased economic growth. So, in this context, a decrease in autonomous consumption (and an increase in saving) could potentially lead to this paradox of thrift.
So, based on these explanations, it seems that all the options could be correct. However, the specific effects would depend on a variety of factors, including the specifics of the country's economy and the extent of the decrease in autonomous consumption.
Similar Questions
Consider a simple economy with no government or external sector. Assume that in this economy the consumption (and thus saving) plans of households are always realized. Assume for the current period this economy is characterized by the following data:Y = 2800, Cp = 1800 and Ip = 400where Y is output, Cd is consumption and Ip is planned investment. In this caseGroup of answer choicesoutput is at its equilibrium level but planned saving and planned investment are unequalaggregate planned expenditure is greater than outputtotal investment recorded in the national accounts would be 1000output is not at its equilibrium level and total investment will be smaller than planned investment.
According to the “paradox of thrift”, for the simple Keynesian income-expenditure model where there is no government or external sector,Group of answer choicesthe equilibrium level of income will be increased as a result of an increase in the proportion of income which households wish to save, although aggregate saving will not increasejust as with an individual who increases the proportion of income they save, if all individuals do this aggregate saving will increasean increase in the proportion of income which individuals wish to save, without a change in the marginal propensity to consume will decrease the size of the income-expenditure multiplierin the aggregate an increase in the proportion of income which households wish to save will not increase aggregate saving if the level of investment is unchanged.
Select Any One Of the Following Options: If the marginal propensity to save is 0.2 and the government decreases its purchases by $20 billion, then real GDP willDecrease by $25 billion.Decrease by $100 billion.Increase by $100 billion.Increase by $25 billion.
Consider a simple Keynesian model without government spending or taxation. Suppose autonomous consumption is 500 and autonomous investment is 300 and the equilibrium level of output is 2400. Then the marginal propensity to consume is: Group of answer choices2/33/53Uncertain, not enough information.
If the marginal propensity to save is 0.2 and the government decreases its purchases by $20 billion, then real GDP will
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.