The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 13

Some people claim that recessions are caused by excessive saving on the part of the public. When people decide to save more, they are deciding to buy less. Won't that cause some goods to go unsold? And won't that cause producers to reduce their levels of output, laying people off and thus reducing their incomes, causing these people to buy less, thus setting off a downward spiral? How would you evaluate the claim that those who spend lavishly create prosperity while those who save bring on recessions?