It's not your fault, it's this rather poorly written plugin.
Your issue can be solved like this (assumes you can edit PHP, and you have the latest version of the plugin):
1. Open wp-content/plugins/wordpress-seo/frontent/class-frontend.php
2. Go to line 582, it should look like this:
( is_home() && get_query_var( 'paged' ) > 1 )
3. Select the entire line 582, and replace it with
( is_home() && get_query_var( 'paged' ) > 1 && ( isset( $this->options['noindex-subpages'] ) && $this->options['noindex-subpages'] ))
EXACTLY as it I put it here.
This will fix your problem. I basically added the check for the
noindex-subpages option (the "No index subpages of archives" tick box in your screenshot). Without this check, the plugin treats your "home" archive outside the normal rule for archives controlled by that tickbox.
IMO this is a very, very serious bug, as it literally hides your main post archive from search engines, behind your back, and this is done by a SEO optimization plugin...
Good luck, let us know.