Macroeconomic Theory Spring 2017 Jeffrey Parker, Reed College
March 10 "paper" of the week
Assigned paper
Keynes, John Maynard. 1936. The General Theory of Employment, Interest and Money. Chapters 8 through 10.
Reading suggestions
There is very little math in these chapters, but that does not make them easy reading! Keynes uses terminology that was non-standard in his day, and even some of the standard terminology of the 1930s is archaic today.
You may refer to other chapters of the book for clarification if you think that is helpful.
Questions for analysis
We used a very simple representation of Keynes's consumption function in equation (4) of coursebook Chapter 8. To what extent does this equation accurately reflect Keynes's theory of consumption?
What aspects of Keynes's ideas about consumption spending are ignored in equation (4)? Are these things important? Would the multiplier process be substantially different if they were included?
The Keynesian multiplier is one of the central take-aways from the General Theory. It presents a very optimistic view of the power of expansionary fiscal policy. How do you think the multiplier is affected by general macroeconomics conditions, and would it be more or less effective in today's US economy than in the time of the Great Depression?
What problems can you envision that would cause the multiplier to be smaller than Keynes's simple framework suggests?