Look at this past Sunday's news, commercial, internet articles or any other media and tell us of a fallacy you discovered.
News: The news paper reveals a fact that the gross domestic product (GDP) of the country falls by around $4,563 billion from the last year. They analysis it as it happens because of increasing number of savings within the country.
This is fallacy of composition. In an economy where everyone saves money total demand of products, total income of people, and total savings would go down (GDP). This theory is known as paradox of thrift and it is harmful for an economy. Therefore, which is good for an individual may not be as good for the whole country.
Fall in aggregate supply is due to fall in aggregate demand for finding market equilibrium, and the demand falls due to paradox of thrift. Therefore, paradox of thrift becomes consistent with fall in aggregate supply.
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