Reforming the undergraduate macroeconomics curriculum: the case for a thorough treatment of accounting relationships Online publication date: Mon, 10-Apr-2017
by Johannes Schmidt
International Journal of Pluralism and Economics Education (IJPEE), Vol. 8, No. 1, 2017
Abstract: The paper gives an overview of the important macroeconomic accounting relationships and the so-called 'balance mechanics' that should be systematically treated in an undergraduate macroeconomics course. It is argued that a mastery of these relationships is in itself a good basis for understanding economic events and debates. Furthermore, these relationships give a solid foundation for a pluralistic teaching approach, a comparison of different models, and a critical evaluation of economic policy proposals. This is shown by looking closer at three examples: first, the problem of coordination between saving and investment can be made much clearer when balance mechanics and accounting relationships are taken into account; second, a related problem of economic policy - the case for (or against) a funded pension system - is evaluated; and third, it is shown how balance mechanics can be used as a consistency check for economic models.
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