The concept of "Paradox of Thrift" was popularized by:
Options
AAdam Smith
BKeynes
CMarshall
DRicardo
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Determination of National IncomePYQ - May 2022 (Inter)Question 120 of 20
All Questions Correct Answer
✅ Option b — Keynes
All Options:
- AAdam Smith
- BKeynes
- CMarshall
- DRicardo
Detailed Solution & Explanation
To solve this question, let's break it down step by step:
• The concept of "Paradox of Thrift" refers to a situation where an increase in savings leads to a decrease in overall savings and economic activity.
• This concept is closely related to the idea that if everyone saves more, aggregate demand will decrease, leading to lower economic activity and potentially even lower overall savings.
• The economist who popularized this concept is associated with the idea that aggregate demand is a key driver of economic activity, and that individual actions can have unintended consequences on the broader economy.
• The correct economist is known for his work on the importance of aggregate demand and the potential for market failures, which is a key aspect of the "Paradox of Thrift".
• Keynes is the economist who popularized this concept, as it is a key aspect of his critique of classical economics and his argument for the importance of government intervention in the economy.
• In contrast, Adam Smith is known for his work on the "invisible hand" and the idea that individual self-interest leads to socially beneficial outcomes, which is not directly related to the "Paradox of Thrift".
• Marshall and Ricardo are also important economists, but their work is not as closely associated with this specific concept.
About This Chapter: National Income
Paper
Paper 4: Business Economics
Weightage
15%
Key Topics
Aggregates, Measurement, Keynesian Theory
A crucial chapter covering national income aggregates like GDP, GNP, NDP, NNP, and the methods of measuring national income (Income, Expenditure, and Output methods). It also introduces Keynesian Theory including the concepts of Aggregate Demand, Consumption Function, and the Multiplier.
View Official ICAI SyllabusExam Strategy Tip
Practice numerical questions on GDP/GNP calculations and the Multiplier. These are guaranteed marks in every exam. Also understand the circular flow of income clearly.
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