Chetan, in a discussion with a couple of friends says "people spend so much income in various activities like celebrations and on other luxury goods. If people will save more money our economy will prosper. Hearing this Akash says "I dont think so". What do you think is the reason for Akash to disagree with Chetan?

All of these

The correct answer is Option 4: All of these

Akash is likely disagreeing with Chetan due to the Paradox of Thrift and its implications. Here's a breakdown of the reasoning:

1. Paradox of Thrift: This economic concept suggests that while individual saving is beneficial for a person, if everyone tries to save more at the same time, it can lead to reduced overall economic activity. This is because increased saving reduces immediate consumption, which decreases aggregate demand. Lower aggregate demand can lead to reduced business revenues, layoffs, and ultimately a decrease in overall income and employment, negating the intended benefits of increased savings.

2. Reduction in Aggregate Demand: If people save more and spend less on consumption, aggregate demand decreases. This reduction in demand can lead to slower economic growth or even a recession if businesses cut back on production and investment in response.

3. Increased Inventories of Goods: Decreased consumption can lead to higher inventories of unsold goods for businesses. This can cause businesses to reduce production and possibly lay off workers, which further reduces income and consumption in a negative feedback loop.

Given that all of these effects are related and can explain why increasing saving might not always lead to immediate economic prosperity, the most comprehensive option is: All of these.