Paradox of Thrift means:

If all the people of the economy increase the proportion of income they save, the total value of saving in the economy will not increase, it will either decline or remain unchanged.

The correct answer is Option (4) → If all the people of the economy increase the proportion of income they save, the total value of saving in the economy will not increase, it will either decline or remain unchanged.

The Paradox of Thrift refers to the situation where if all individuals in an economy increase their saving rates, it can lead to a decrease in overall spending and economic growth, potentially causing a decline in total savings or a reduction in the total value of investment.

This happens because:

    Increased saving often translates to decreased spending.
    Lower spending by consumers leads to lower demand for goods and services.
    Businesses may respond by cutting back on production, leading to lower profits and potentially layoffs.
    With reduced income, people may have less to save overall, negating the initial increase in savings.