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If all the people of the economy increase the proportion of income they save, the total value of savings in the economy will not increase - it will either decline or remain unchanged. This result is known as the___.

Solution

✅ Correct Option: 3

If everyone tries to save a higher proportion of income, aggregate demand falls, income falls via the multiplier, and total savings end up unchanged or lower. This counterintuitive result is called the paradox of thrift.

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