with the AS/AD model that shows equilibrium values of real GDP and the price level (or, in their dynamic variants, the growth rates of GDP and inflation), you might be wondering about the equilibrium interest rate, a core macroeconomic variable that affects all of us.

It turns out that real interest rates, just like real GDP and the unemployment rate, also move towards some sort of equilibrium, known in macroeconomics as the "natural rate of interest." (The economic concept of equilibrium, one of the three pillars of economics we discussed in Week 1, strikes again.) What has puzzled economists in the past decades is why this natural real rate of interest is in secular decline. That is, why it is so much lower than it used to be, say, 50 years ago. And will that change or will it remain low?

Your first response should be that interest rates are now rising! Right. That's a reflection of the post-pandemic adjustments to over-stimulative monetary and fiscal policies put in place during and after the pandemic, as we reviewed in class. But as we move on from the effects of the pandemic, will we return to a low real interest rate? Or has something fundamentally changed?

As you read this, your second thought might be "why should I care"? Ah, but you should. Personal financial investment decisions (stocks, bonds, real estate, and so on) depend critically on what you think might happen to interest rates. Therefore, take a look at a simple "Planet Money" synopsis of a debate taking place between two well-known Keynesian economists, Larry Summer and Olivier Blanchard, found in the article posted in the Week 6 Content Module. Then address each of the following questions.

1. What is "secular stagnation"?
2. Why does Messr. Summers think that interest rates will not return to their secular stagnation lows? And why does Monsieur Blanchard think the opposite?
3. So who's right? (And, yes, you must take sides.) And why? Explain how your view might affect your personal spending and saving/investment decisions. Be specific.

As is the norm for DBs, to be eligible to receive full credit, you must make your first post by 23:59 p.m. (CET) on Monday, April 24, and a minimum of two additional commentary posts by the beginning of our Week 7 class session on Thursday, April 27.

Best wishes for an engaging discussion on a topic that will affect each and every one of us, no matter how arcane a topic it might appear to you at first sight!