Keynesian Economics

Step 1: Define the paradox.
The Paradox of Thrift, proposed by Keynes, states that when individuals collectively try to save more, total savings in the economy may not rise.
Step 2: Reasoning.
- Higher savings → lower consumption → lower aggregate demand.
- Lower demand reduces output and income → total savings do not increase.
Step 3: Eliminate other options.
- (A) Multiplier → explains how investment increases output by multiple.
- (C) Deficient demand → general situation of insufficient demand.
- (D) Investment → refers to capital expenditure, not paradox.
Final Answer:

Step 1: Recall the book.
"The General Theory of Employment, Interest and Money" was published in 1936 by John Maynard Keynes.
Step 2: Contribution.
This work laid the foundation of modern macroeconomics. Keynes challenged classical economics by arguing that aggregate demand determines the overall level of employment and output, especially during depressions.
Step 3: Elimination of wrong options.
- (A) Adam Smith → known for "Wealth of Nations" (1776).
- (B) David Ricardo → famous for "Principles of Political Economy" and comparative advantage theory.
- (C) J.S. Mill → author of "Principles of Political Economy" (1848).
Final Answer: