Question

Identify the correctly matched pair from Column A to Column B:

Column A	Column B
(1) Y = AD	(a) Level of output at full employment
(2) Forward Multiplier	(b) Withdrawal of investment decreases income
(3) Paradox of Thrift	(c) People save less or same as before
(4) Multiplier (k) < 1	(d) 0 < MPC < 1

Options

• 1 - (a)

• 2 - (b)

• 3 - (c)

• 4 - (d)

Answer 1

3 - (c)

Explanation:

According to the paradox, an increase in autonomous saving causes a fall in aggregate demand and, as a result, a decrease in gross output, which lowers total saving.