## Making Macro Dynamic II

Posted by Robert Whaples on November 25, 2009

On Monday a good portion of my students slipped out of town early for Thanksgiving break. Expecting this, I used the class to review Chapter 12, which uses the dynamic AS/AD model to explain business fluctuations. Now that I’ve spent a few days teaching this chapter, I’m less convinced that the dynamic AS/AD model dominates the traditional static AS/AD as a teaching device — perhaps they *complement* one another.

The dynamic model’s big upside is that there are fewer curves to be drawn since everything is about rates of change — and it thereby incorporates the relentless growth of productivity very easily. However, the dynamic approach makes it harder to show an economy that’s recovering from a recession — as ours now is. Last quarter the U.S. economy grew at 2.8%, close to the long-term average. Thus, a dynamic graph of it would have the intersection of the AD and SRAS curves almost exactly at the Solow Growth Curve, as aggregate demand growth has picked back up. What’s not shown is the incredible amount of slack in the economy and the opportunity for a spurt of growth to make up for lost time. The graph is about the same when there’s no cyclical unemployment (a couple years ago) vs. when there’s huge cyclical unemployment (today). Next time I teach this chapter, I intend to spend time to first derive the static model and *then* show how it works dynamically. I’ve also found it harder (but not impossible) to use the dynamic model to explain one of my old favorites — Say’s Law — although I find it easier to explain stagflation in the model

My syllabus said we would cover Chapter 13 on Monday, but I decided not to lecture on it. It’s a fairly interesting chapter, but (as has happened with a couple other chapters) it’s pretty self-explanatory and there’s not much to be said in class to add value to it.

Finally, I’ve made a couple of Sporcle quizzes for my students to help them study for the final. The great thing about Sporcle is that you get to see how well you did in comparison to everyone else, which really motivates some students. And you get immediate gratification from a correct answer — another study motivator. There’s a micro terminology quiz and a macro terminology quiz. Feel free to take the quizzes and/or to send your students/friends to them at

http://www.sporcle.com/games/DeaconEcon/Concepts_Micro and

http://www.sporcle.com/games/DeaconEcon/Concepts_Macro

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