Title: Reforming the undergraduate macroeconomics curriculum: the case for a thorough treatment of accounting relationships

Authors: Johannes Schmidt

Addresses: Faculty of Management Science and Engineering, Karlsruhe University of Applied Sciences, Moltkestrasse 30, D-76133 Karlsruhe, Germany

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.

Keywords: balance mechanics; saving-investment relationship; accounting; macroeconomics curriculum; economic education; undergraduate teaching; interest rate; model evaluation; pension system; funding; pluralism.

DOI: 10.1504/IJPEE.2017.083559

International Journal of Pluralism and Economics Education, 2017 Vol.8 No.1, pp.42 - 67

Received: 11 Apr 2016
Accepted: 15 Nov 2016
Published online: 10 Apr 2017 *

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