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

Cleomar Gomes Da Silva and Fábio Gomes

EconomiA, 2022, vol. 23, issue 1, 44-61

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.

Keywords: Undergraduate teaching; Lucas critique; Consumption function; Policy evaluation; A22; B22; B23; B41; E21 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:econpp:econ-05-2022-0010

DOI: 10.1108/ECON-05-2022-0010

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