Deakin University
Browse

File(s) under permanent embargo

To save or to consume: linking growth theory with the Keynesian model

journal contribution
posted on 2007-01-01, 00:00 authored by Y K Kwok
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.

History

Journal

Journal of economic education

Volume

38

Issue

1

Season

Winter

Pagination

109 - 122

Publisher

Heldref Publications

Location

Washington, DC

ISSN

0022-0485

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

Copyright notice

2007, Heldref Publications

Usage metrics

    Research Publications

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC