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ERIC Number: ED312175
Record Type: Non-Journal
Publication Date: 1988
Pages: 25
Abstractor: N/A
Reference Count: N/A
The Keynesian Diagram: A Cross to Bear?
Fleck, Juergen
In elementary economics courses students are often introduced to the basic concepts of macroeconomics through very simplified static models, and the concept of a macroeconomic equilibrium is generally explained with the help of an aggregate demand/aggregate supply (AD/AS) model and an income/expenditure model (via the Keynesian cross diagram). Although the AD/AS model does not provide a perfect way to explain the adjustment processes that lead to a new equilibrium national income after a change in spending, it is, in its simplicity, nonetheless a very useful pedagogical tool. The usefulness of the Keynesian cross diagram, however, is highly overrated. Its extensive coverage in introductory economics textbooks is not warranted since it does not seem to contribute significantly to undergraduates' general understanding of economic reasoning. While the chain reaction process of the expenditure multiplier is generally understood intuitively when it is explained in plain English with the help of a real life example, many introductory level students seem to experience considerable difficulty in understanding the diagramatical and mathematical analysis required by the Keynesian diagram. Heavy reliance on mathematical and diagramatical analysis at such an early stage probably does little more than contribute to the general confusion often experienced by beginning economics students. Simply supplementing the AD/AS framework, which is often presented before the Keynesian diagram, with a thorough discussion of the actual adjustment processes that take place when spending increases occur, will in most cases lead to a better comprehension of the material discussed than the use of the Keynesian diagram. The text includes four diagrams and several equations to illustrate the AD/AS framework. (PPB)
Publication Type: Opinion Papers
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A