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government policies that increase the saving rate are always sound? true or false?

government policies that increase the saving rate are always sound? true or false?

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Answer #1

False,

Increase in the saving in the economy will reduce the demand in the market and shift the Aggregate demand curve to the left, the new equilibrium will be at a lower price and lower output, this will lead to a paradox of thrift in the market and may lead to a recession unless investment doesn't catch up with it.

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