ABSTRACT
This chapter summarizes the main features of the approaches to macroeconomic analysis of the national economy. People might wonder whether understanding something of macroeconomic equations is needed for public budgeting process. Surprisingly, budget decision makers have been involved in the debates that necessitate a certain level of understanding the equations. With careful attention people can grasp why scholars and practitioners suggested such theories and equations without significant challenges. Many scholars have suggested new frameworks or have revived Classical theories to explain the 2008 financial market collapse. Although Keynesian views have been dominating the field of macroeconomic theories, people need first to understand the Classical approach to macroeconomic analysis. Hyman Minsky decades ago developed a theory called the financial instability hypothesis. It emphasized the non-neutrality of money and the important role of financial institutions in the economy. When the U.S. economy was going through the 2008 economic crisis, many observers said that the Minsky moment had ultimately arrived.
