TY - JOUR
T1 - To save or to consume
T2 - Linking growth theory with the Keynesian model
AU - KWOK, Yun Kwong
N1 - Copyright:
Copyright 2009 Elsevier B.V., All rights reserved.
PY - 2007/12
Y1 - 2007/12
N2 - In the neoclassical growth theory, higher saving rate gives rise to higher output per capita. However, in the Keynesian model, higher saving rate causes lower consumption, which may lead to a recession. Students may ask, "Should we save or should we consume?" In most of the macroeconomics textbooks, economic growth and Keynesian economics are in separate, sometimes unsequential, chapters. The connection between the short run and the long run is not apparent. The author builds a bridge between the neoclassical growth theory and the Keynesian model. He links the Solow diagram and the IS-LM curves and depicts the short-run to long-run transition of the economy after changes in saving and other macroeconomic policies.
AB - In the neoclassical growth theory, higher saving rate gives rise to higher output per capita. However, in the Keynesian model, higher saving rate causes lower consumption, which may lead to a recession. Students may ask, "Should we save or should we consume?" In most of the macroeconomics textbooks, economic growth and Keynesian economics are in separate, sometimes unsequential, chapters. The connection between the short run and the long run is not apparent. The author builds a bridge between the neoclassical growth theory and the Keynesian model. He links the Solow diagram and the IS-LM curves and depicts the short-run to long-run transition of the economy after changes in saving and other macroeconomic policies.
KW - Keynesian model
KW - Medium-run adjustment
KW - Neoclassical growth theory
UR - http://www.scopus.com/inward/record.url?scp=33947668770&partnerID=8YFLogxK
U2 - 10.3200/JECE.38.1.109-123
DO - 10.3200/JECE.38.1.109-123
M3 - Journal article
AN - SCOPUS:33947668770
SN - 0022-0485
VL - 38
SP - 109
EP - 123
JO - Journal of Economic Education
JF - Journal of Economic Education
IS - 1
ER -