Category Teaching
Three meanings of “printing money causes inflation”
This is supposed to be a very simple post, mainly for non-economists. "Printing money causes inflation" can mean three different things. What I will say here should be obvious to economists, but I'm not sure if it is obvious to non-economists. And it makes me wonder if sometimes things get lost in translation. Maybe, just […]
It’s the Inflation Fallacy, duh!
Paul Krugman is wasting his time trying to figure out why the rich and powerful don't like inflation. There's a simple answer, that also explains why the non-rich and non-powerful don't like inflation either. And you don't need any fancy political economy to figure out the answer. If you want to know why non-economists don't […]
A simple question about Walras Law
Inspired by Free Radical's post, I think I have figured out a simpler and clearer way to say what I want to say about Walras' Law. Ask yourself the following question: Q. Assume an economy where there are (say) 7 markets. Suppose 6 of those markets are in equilibrium (with quantity demanded equal to quantity […]
If new money is always paid as interest on old money
…will an increase in the rate of interest paid for holding money be deflationary (because it increases the demand for money), or inflationary (because it increases the growth rate in the supply of money)? This question crops up from time to time, in comments here and on other blogs, so I thought I would lay […]
Three growth stages of the New Keynesian model
This is very very crude. It's something off the top of my head scribbled on a scrap of paper as an outline for a first draft. But I will never go beyond that outline, because I wouldn't be any good at doing it. The history of the Old Keynesian model is very quick. You have […]
Teaching general principles of macro
In a couple of hours the Bank of Canada will do what it does eight times a year. It will set a temporary target for the overnight rate of interest. Will it raise it, lower it, or leave it the same? What will its decision depend on? How will its decision affect the Canadian economy? […]
How long is the short run? The macroeconomics of “doing nothing” revisited
The answer we normally give, when teaching intro macro, is: "It depends on price stickiness; if prices are very flexible it will be short, and if prices are very sticky it will be long." A better answer would be: "It depends on monetary policy; if monetary policy is very good it will be short, and […]
Interest, capital, MRScc=(1+r)=1+(MPK/MRTci)+(dMRTci/dt)/MRTci
That's the equilibrium condition for the real rate of interest in a competitive economy. I will explain what it means a little later. This is intended as a simple "teaching" post, and because I have a strange feeling that the theory of interest and capital is becoming topical again in the blogosphere, and that a […]
Teaching Loanable Funds vs Liquidity Preference
This is primarily for teachers of intro macro. Maybe for teachers of intermediate macro too, as a way to interpret ISLM. We have two quite different theories of what determines the rate of interest: Loanable Funds says that the rate of interest is determined by desired saving and desired investment. Liquidity Preference says that the […]
Two first year multipliers: their truth, beauty, and usefulness
Alone again or, just me and the money multiplier, against the world of trendy sophisticates who have put aside such childish things. It brings out the reactionary contrarian in me. And the world needs more reactionary contrarians, to help provide negative feedback against the faddish bubble multiplier of popular theory. There are two multipliers we […]
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