How to Teach Intermediate Macroeconomics after the Crisis?

Having just concluded a seven-year run as chief economist of the International Monetary Fund, and having to rewrite the seventh edition of my undergraduate macroeconomics book (link is external) , I had to confront the issue: How should we teach macroeconomics to undergraduates after the crisis? Here are some of my conclusions (I shall focus here on the short and medium runs; it will take another blog to discuss how we should teach growth theory).

The Investment-Saving (IS) Relation

The IS relation remains the key to understanding short-run movements in output. In the short run, the demand for goods determines the level of output. A desire by people to save more leads to a decrease in demand and, in turn, a decrease in output. Except in exceptional circumstances, the same is true of fiscal consolidation.
I was struck by how many times during the crisis I had to explain the “paradox of saving” and fight the Hoover-German line, “Reduce your budget deficit, keep your house in order, and don’t worry, the economy will be in good shape.” Anybody who argues along these lines must explain how it is consistent with the IS relation.
Lire la suite ici http://bit.ly/Blanchard_Macro
Martin Anota, que je vous recommande de suivre sur Twitter (@martin_anota), a fait une traduction partielle de ce texte de Blanchard – Voir ici http://bit.ly/Anota_Blanchard