Use the Great Recession of 2007–2009 to describe the paradox of thrift.

What will be an ideal response?

During the Great Recession of 2007–2009 there was a “reverse wealth effect” because as wealth declined during the recession, people consumed less and saved more. Such a situation creates a paradox of thrift in which more saving helps individual household budgets, but as people cut back on their consumption and increase their saving, the collective effect on the economy is an adverse one that worsened the recession.