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Using a consumption function to explain the Lucas Critique to undergraduate students

Author

Listed:
  • Cleomar Gomes da Silva
  • Fábio Augusto Reis Gomes

Abstract

Purpose - The purpose of this paper is to contribute to the teaching of undergraduate macroeconomics. Design/methodology/approach - To suggest a roadmap, based on a consumption function, to be used by instructors willing to teach the Lucas Critique subject. Findings - Therefore, this paper proposes a lesson, which consists of three parts, to help undergraduates better understand the subject: (1) a grading exercise to bring the topic closer to students’ lives; (2) a Keynesian and an optimal consumption function, followed by an example based on an unemployment insurance policy; and (3) two optional topics consisting of extensions of the optimal consumption function and some empirical results related to the Lucas Critique. Originality/value - The Lucas Critique influenced the evolution of research in macroeconomics, but it is not easily grasped in a classroom.

Suggested Citation

  • Cleomar Gomes da Silva & Fábio Augusto Reis Gomes, 2022. "Using a consumption function to explain the Lucas Critique to undergraduate students," EconomiA, Emerald Group Publishing Limited, vol. 23(1), pages 44-61, June.
    • Handle: RePEc:eme:econpp:econ-05-2022-0010
    DOI: 10.1108/ECON-05-2022-0010
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    More about this item

    Keywords

    Undergraduate teaching; Lucas critique; Consumption function; Policy evaluation; A22; B22; B23; B41; E21;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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