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The argument of classical economists is that higher savings leads to more investment and eventually in the future to higher growth and higher income.

Keynes argued that if individuals save more, they will increase their consumption possibilities in the future. However, if society saves more, this may reduce its future income and consumption since as people save more, they will spend less. Firms will then produce less. There will be thus a multiplied fall in income. This phenomenon of higher savings leading to lower income is known as 'the paradox of thrift'.

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