What is the macroeconomics paradox?

Economics Dec 14, 2020

Expert Solution

The paradox in economics is the situation where the variables fail to follow the generally laid principles and assumptions of the theory and behave in the opposite fashion. There is basically only one macroeconomics paradox which is known as the paradox of thrift or paradox of saving. The paradox states that an increase in autonomous saving leads to a decrease in aggregate demand and thus a decrease in gross output which will, in turn, lower total saving.

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