Numerical answer
The four sentences below, labelled 1, 2, 3 and 4, can be arranged into a coherent paragraph. Decide the correct order.
1. Economists call this the paradox of thrift: an action rational for one household becomes self-defeating when adopted simultaneously by all households.
2. During a recession, conventional wisdom advises households to save more and spend less in order to rebuild their individual finances.
3. But if every household cuts spending at once, aggregate demand falls further, deepening the very recession each household was trying to protect itself against.
4. Understanding this paradox is part of why governments sometimes increase public spending precisely when private spending contracts.
1. Economists call this the paradox of thrift: an action rational for one household becomes self-defeating when adopted simultaneously by all households.
2. During a recession, conventional wisdom advises households to save more and spend less in order to rebuild their individual finances.
3. But if every household cuts spending at once, aggregate demand falls further, deepening the very recession each household was trying to protect itself against.
4. Understanding this paradox is part of why governments sometimes increase public spending precisely when private spending contracts.
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Answer: 2314
Sentence 2 states the individually rational advice (save more during a recession). Sentence 3 shows the collective consequence when everyone follows that advice ('But if every household...'). Sentence 1 names this contradiction as the 'paradox of thrift'. Sentence 4 draws the policy implication that follows from understanding the paradox. The order 2→3→1→4 moves from advice to consequence to naming to implication.
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