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Teaching Keynes’s Principle of Effective Demand within the Real Wage vs. Employment Space

Year: 2009

Type: article

Abstract: This paper reviews several models for teaching Keynes’s principle of effective demand with a special focus on a framework that is familiar to advanced undergraduate students of macroeconomics: the real wage vs. employment space. It is argued that existing approaches to teaching Keynes’s principle of effective demand reflect a tension between two goals: being true to Keynes and translating the effective-demand principle into a story about real wages and employment within a single graphical space. Our main contribution consists of presenting an extended version of a model originally proposed by Lavoie (Rev Radic Polit Econ, 35(2):166–182, 2003), which seems to be a reasonable compromise between these two goals.

Source: Forum for Social Economics

DOI: 10.1007/s12143-009-9035-z

Author: Corrado Andini

Institution: Universidade da Madeira

Language: English

Topic: Economic Theory and Policy

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

Funder: Fundação para a Ciência e a Tecnologia