What is macroeconomics paradoxes? Give some examples.
Macroeconomics paradoxes are referred as those situations where the facts hold true at the micro level (i.e. in terms of individual economic units) but do not hold true at the macro level (i.e. in terms of overall aggregate units). They are also known as 'Micro-Macro Paradoxes'. Some of the example are as follows.
i. Paradox of Saving: It is said that if an individual in an economy increases his/her savings then his/her savings will rise. But if all the individuals in an economy simultaneously increase their savings then the overall saving of the economy will infact decrease.
ii. Paradox of Employment Level: It is said if an individual takes up an employment at a lower-wage rate then the employment level may increase. However, if all the labourers accept employment at a lower-wage rate then the overall employment level may infact decrease.
iii. Paradox of Cash Withdrawals: If an individual decides to withdraw his funds from a bank, then it will not harm the workings of the bank. However, if all the individuals decide to withdraw their funds from the bank then this will result in bank failure.