Can Saving Too Much Money Cause a Recession?: Side Effects of Saving

The video discusses the impact of saving on the economy, highlighting that while saving is generally positive, excessive saving can lead to reduced consumption, affecting economic growth and quality of life. It explains how saving can lead to business closures and unemployment if not balanced with spending. The concept of economic natural selection is introduced, where dips in demand help identify strong businesses. However, too much saving can lead to risky bank loans, as seen in the 2008 mortgage crisis.

What is one potential negative effect of increased saving on the economy?

• It boosts economic growth.

• It leads to increased spending.

• It can cause businesses to run out of funds.

• It improves employment rates.

What happens if everyone stops spending all at once?

• Businesses thrive and employment rises.

• Businesses run out of funds and unemployment rises.

• Banks find more ways to lend money.

• Economic growth figures improve.

How does excessive saving affect the quality of life according to economists?

• It enhances the quality of life by increasing savings.

• It improves the quality of life by reducing wants.

• It reduces the quality of life by limiting consumption.

• It has no impact on the quality of life.

What is a potential consequence of banks having too much savings and not enough demand for loans?

• Banks will increase interest rates.

• Banks will make riskier loans.

• Banks will make safer loans.

• Banks will stop offering loans.

What is the term used to describe the process of sorting out productive businesses during economic downturns?

• Economic natural selection

• Economic transformation

• Economic evolution

• Economic revolution