International Economics. Unit 3 Macroeconomic Policy in an Open Economy. Mundell-Fleming model
|
|
- Jemimah Rodgers
- 5 years ago
- Views:
Transcription
1 International Economics Unit 3 Macroeconomic Policy in an pen Economy. Mundell-Fleming model 1
2 Previous conclusion The ultimate effects of a devaluation are in large part dependent upon the economic policies that accompany the devaluation. Economic objectives - Internal Balance: - Price stability - Full employment - External Balance: - Equilibrium in the BP Economic policies - Aggregate supply policies - Aggregate demand policies: - Expenditure changing policies. Aim to influence the level of AD - Expenditure switching policies. Aim to influence the composition of AD 2
3 Internal and external equilibrium: the SWAN diagram RER RER Surplus EB E 0 Inflation CA > 0 E 1 Unemployment E 1 IB E 0 Deficit CA < 0 A A 3
4 The Swan diagram 4
5 Mundell-Fleming model (IS-LM-BP model) Aim: Analyze the effectiveness of fiscal and monetary policy Assumptions: - Domestic and foreign prices are constant - Unemployment - International capital mobility Economic relationships (Equations). 5
6 The goods market Exports and Government expenditure are considered to be autonomous 6
7 Derivation of the IS schedule 7
8 The money market M d = M s M t = M t (Y) M sp = M sp (r) M s = D + R (φ =1) D = Domestic asset (bond) holdings of the monetary authorities = Domestic credit R = Foreign asset holdings (Foreign exchange and any other internationally acceptable assets) of the monetary authorities, valued in domestic currency = International reserves M t +M sp = M s 8
9 Derivation of the LM schedule 9
10 The foreign sector BP = CA + K = 0 X is exogenous K = K(r) 10
11 Derivation of the BP schedule 11
12 Figure 4.5 Equilibrium of the model 12
13 Monetary policy (Example of expansionary MP) The Central Bank purchases bonds from the public and injects newly created money. LM to the right Prices of bonds go up Interest rates go down Investment, consumption and income increase BP goes into deficit or the domestic currency depreciates Fiscal policy (Example of expansionary FP) G increases (The government pays for this increase by selling bonds) and this increases income. IS to the right Price of bonds go down Interest rates go up Investment, consumption and income decrease Final result on Y: increases but by less than the increase in G The CA deteriorates and the K improves: BP changes? Exchange rates? As we will see, the exchange rate regime turns out to be crucial to the behaviour of the economy 13
14 No capital mobility and fixed exchange rates r BP + LM r BP + LM LM LM r 0 A C B r C B r 0 A r IS IS IS Y 0 Y Y Y 0 Y Y MP FP 14
15 Imperfect capital mobility and fixed exchanges rates r LM LM BP A=C r 0 r + B IS Y 0 Y Y MP 15
16 Imperfect capital mobility and fixed exchanges rates r r BP r B LM LM BP r C + LM LM r 0 + A C r 0 A B IS IS IS IS Y 0 Y Y Y 0 Y Y FP 16
17 Perfect capital mobility and fixed exchange rates r r LM LM LM LM r 0 A=C + BP r 0 A C + BP IS IS IS Y 0 Y Y Y 0 Y Y MP FP 17
18 Imperfect capital mobility and flexible exchange rates r BP + BP BP + BP LM r LM LM LM LM A C A C B B IS IS IS IS MP Y 0 Y Y Negligible effect on LM Non-negligible effect on LM 18
19 Imperfect capital mobility and flexible exchange rates r BP BP LM r LM B C C B BP BP + A IS IS + A IS IS IS IS Y 0 Y Y FP 19
20 Perfect capital mobility and flexible exchange rates r r LM LM LM A C + r = r * r = r * BP A=C + BP IS IS IS IS Y 0 Y Y Y 0 Y Y MP FP 20
21 Monetary and fiscal policies: Summary effects ER regime Degree of K mobility Monetary Policy Fiscal Policy SR LR SR LR Fixed ER NKM E I E I (Crowding out) IKM E I E E (the more effective the flatter the BP curve) PKM I (totally) E (totally) Floating ER IKM E S increases E S increases E (the more effective the stepper the BP curve) S increases if BP slope>lm slope. S decreases if BP slope<lm slope E PKM E S increases I (totally) S decreases 21
22 The principle of effective market classification: the assignment problem MP E D M S MP E Inflation MP N A Unemp. MP R M S B C IB FP R FP N FP E FP G G 22
23 The assignment problem MP MP C EB MP E M S Deficit MP E M S Deficit MP N A B MP N A B MP R M S Surplus C EB MP R Surplus FP R G FP N FP E G FP FP R G PF N FP E G FP 23
24 The assignment problem MP D MP MP E Deficit Unemp. Deficit Inflation MP E MP N EP F MP N J EP MP R Surplus Unemp. Surplus Inflation IB EB MP R IB EB FP R FP N FP E FP FP R FP N FP E FP 24
25 The assignment problem MP EB MP E EP MP N MP R IB J FP R FP N FP E FP 25
26 Limitations of the Mundell-Fleming model 1. Marshall-Lerner condition 2. Interaction of stocks and flows 3. Neglect of long run budget constrains 4. Aggregate supply curve is horizontal 5. Treatment of capital flows 6. Monetary and fiscal policies are not that flexible 7. Exchange rate expectations 26
27 AD-AS model in an open economy AD and fixed exchange rates r LM(P 0 ) LM(P 1 ) r 0 r 1 A B IS(P 1, G 1 ) P Y 0 Y 1 IS(P 1, G 0 ) IS(P 0, G 1 ) IS(P 0, G 0 ) Y P 0 P 1 AD AD Y 0 Y 1 Y 27
28 AS and fixed exchange rates AD-AS model in an open economy w P L S P AS LT AS ST AS ST w P 1 w = P P 1 w P 1 0 P 0 L D L FE L 1 L Y FE Y 1 Y 28
29 ST equilibrium AD-AS model in an open economy P AS ST P * E AD Y * Y 29
30 LT equilibrium AD-AS model in an open economy 30
31 AD-AS model in an open economy Is there an automatic adjustment process? 31
32 AD-AS model in an open economy Can we help the adjustment process? 32
33 AD-AS model in an open economy Effects of a devaluation: short-term and long-term 33
34 AD-AS model in an open economy AD and floating exchange rates 34
35 AD-AS model in an open economy Are demand policies effective? 35
36 LT equilibrium AD-AS model in an open economy 36
37 AD-AS model in an open economy Is there an automatic adjustment process? 37
38 AD-AS model in an open economy Can we help the adjustment process? 38
39 Supply shocks AD-AS model in an open economy 39
Topic 7: The Mundell-Fleming Model
Topic 7: The Mundell-Fleming Model Read: Ch.18.3-18.6. Outline: 1. Introduction. 2. The IS-LM-BP equilibrium. 3. Floating exchange rates 4. Fixed exchange rates. 5. The case of imperfect capital mobility
More informationEconomics Final Examination December, Part A: Multiple Choice. Choose the best alternative that answer or completes the sentence.
Economics 243-01 Final Examination December, 2000 Instructions: Put your name, social security number and your seat number on the blue book provided. Put all your answers in the blue book provided. Turn
More informationUniversity of Toronto July 27, 2012 ECO 209Y L0101 MACROECONOMIC THEORY. Term Test #3
Department of Economics Prof. Gustavo Indart University of Toronto July 27, 2012 SOLUTIONS ECO 209Y L0101 MACROECONOMIC THEORY Term Test #3 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total
More informationdr Bartłomiej Rokicki Chair of Macroeconomics and International Trade Theory Faculty of Economic Sciences, University of Warsaw
Chair of Macroeconomics and International Trade Theory Faculty of Economic Sciences, University of Warsaw Main assumptions of the model Small open economy Short term analysis constant prices and wages
More informationUniversity of Toronto July 21, 2010 ECO 209Y L0101 MACROECONOMIC THEORY. Term Test #2
Department of Economics Prof. Gustavo Indart University of Toronto July 21, 2010 SOLUTIONS ECO 209Y L0101 MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total
More informationSOLUTION ECO 209Y - L5101 MACROECONOMIC THEORY. Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER. University of Toronto June 22, 2004 INSTRUCTIONS:
Department of Economics Prof. Gustavo Indart University of Toronto June 22, 2004 SOLUTION ECO 209Y - L5101 MACROECONOMIC THEORY Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total
More informationUNIVERSITY OF TORONTO Faculty of Arts and Science. April Examination 2016 ECO 209Y. Duration: 2 hours
UNIVERSITY OF TORONTO Faculty of Arts and Science April Examination 2016 ECO 209Y Duration: 2 hours Examination Aids allowed: Non-programmable calculators only LAST NAME FIRST NAME STUDENT NUMBER DO NOT
More informationThe Mundell Fleming Model. The Mundell Fleming Model is a simple open economy version of the IS LM model.
International Finance Lecture 4 Autumn 2011 The Mundell Fleming Model The Mundell Fleming Model is a simple open economy version of the IS LM model. I. The Model A. The goods market Goods market equilibrium
More informationECO 209Y MACROECONOMIC THEORY AND POLICY
Department of Economics Prof. Gustavo Indart University of Toronto December 3, 2014 ECO 209Y MACROECONOMIC THEORY AND POLICY Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER Indicate your section of the
More informationECON 2123 Review Question 3
ECON 2123 Review Question 3 TA: Mr. Ding Dong May 6, 2018 1 Open Economy Macroeconomics Question 1: Japan produces and exports only cameras, and Saudi Arabia, produces and exports only barrels of oil.
More informationECO 209Y - L5101 MACROECONOMIC THEORY. Term Test #2
Department of Economics Prof. Gustavo Indart University of Toronto July 19, 2005 SOLUTIONS ECO 209Y - L5101 MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME INSTRUCTIONS: STUDENT NUMBER 1. The total
More information14.05 Intermediate Applied Macroeconomics Problem Set 5
14.05 Intermediate Applied Macroeconomics Problem Set 5 Distributed: November 15, 2005 Due: November 22, 2005 TA: Jose Tessada Frantisek Ricka 1. Rational exchange rate expectations and overshooting The
More informationEC202 Macroeconomics
EC202 Macroeconomics Koç University, Summer 2014 by Arhan Ertan Study Questions 4 1. Assume that the LM curve for a small open economy with a floating exchange rate is given by Y = 200r 200 + 2(M/P), while
More informationThe Mundell-Fleming Model. Instructor: Dmytro Hryshko
The Mundell-Fleming Model Instructor: Dmytro Hryshko Small open economy with perfect capital mobility. r = r, where r is the world interest rate. Goods-market equilibrium: Y = C(Y T ) + I(r ) + G + NX(q)
More informationSOLUTION ECO 202Y - L5101 MACROECONOMIC THEORY. Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER. University of Toronto June 18, 2002 INSTRUCTIONS:
Department of Economics Prof. Gustavo Indart University of Toronto June 18, 2002 SOLUTION ECO 202Y - L5101 MACROECONOMIC THEORY Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total
More informationECO 209Y MACROECONOMIC THEORY AND POLICY. Term Test #2. December 13, 2017
ECO 209Y MACROECONOMIC THEORY AND POLICY Term Test #2 December 13, 2017 U of T E-MAIL: @MAIL.UTORONTO.CA SURNAME (LAST NAME): GIVEN NAME (FIRST NAME): UTORID (e.g., LIHAO118): INSTRUCTIONS: The total time
More informationUniversity of Toronto December 3, 2010 ECO 209Y MACROECONOMIC THEORY AND POLICY. Term Test #2 L0101 L0301 L0401 M 2-4 W 2-4 R 2-4
Department of Economics Prof. Gustavo Indart University of Toronto December 3, 2010 ECO 209Y MACROECONOMIC THEORY AND POLICY SOLUTIONS Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER Circle your section
More informationUniversity of Toronto January 25, 2007 ECO 209Y MACROECONOMIC THEORY. Term Test #2 L0101 L0201 L0401 L5101 MW MW 1-2 MW 2-3 W 6-8
Department of Economics Prof. Gustavo Indart University of Toronto January 25, 2007 SOLUTION ECO 209Y MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER Circle your section of the course:
More informationECO 209Y L0101 MACROECONOMIC THEORY. Term Test #2
Department of Economics Prof. Gustavo Indart University of Toronto June 25, 2012 ECO 209Y L0101 MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total time for
More informationChapter 4 Monetary and Fiscal. Framework
Chapter 4 Monetary and Fiscal Policies in IS-LM Framework Monetary and Fiscal Policies in IS-LM Framework 64 CHAPTER-4 MONETARY AND FISCAL POLICIES IN IS-LM FRAMEWORK 4.1 INTRODUCTION Since World War II,
More informationSimultaneous Equilibrium in Output and Financial Markets: The Short Run Determination of Output, the Exchange Rate and the Current Account
Fletcher School, Tufts University Simultaneous Equilibrium in Output and Financial Markets: The Short Run Determination of Output, the Exchange Rate and the Current Account Prof. George Alogoskoufis The
More informationSummary of Macroeconomic Models ECS2602 C O M P I L E D B Y S K E N N E D Y- PA L M E R & T U Y S ( R E V I S E D F E B R U A RY )
Summary of Macroeconomic Models ECS2602 C O M P I L E D B Y S K E N N E D Y- PA L M E R & T U Y S 2 0 1 5 ( R E V I S E D F E B R U A RY 2 0 1 6 ) Important information The purpose of this summary is to
More informationOpen Economy Macroeconomics, Aalto Universtiy SB, Spring 2016, Solution to Problem Set 4
Open Economy Macroeconomics, Aalto Universtiy SB, Spring 2016, Solution to Problem Set 4 Jouko Vilmunen Monday, 4 April 2016 Exercise 1 (Poole) The way we normally draw the LM-curve assumes that the central
More informationSOLUTIONS. ECO 209Y - L5101 MACROECONOMIC THEORY Term Test 2 LAST NAME FIRST NAME STUDENT NUMBER. University of Toronto January 26, 2005 INSTRUCTIONS:
Department of Economics Prof. Gustavo Indart University of Toronto January 26, 2005 SOLUTIONS ECO 209Y - L5101 MACROECONOMIC THEORY Term Test 2 LAST NAME FIRST NAME INSTRUCTIONS: STUDENT NUMBER 1. The
More informationLecture 5: Flexible prices - the monetary model of the exchange rate. Lecture 6: Fixed-prices - the Mundell- Fleming model
Lectures 5-6 Lecture 5: Flexible prices - the monetary model of the exchange rate Lecture 6: Fixed-prices - the Mundell- Fleming model Chapters 5 and 6 in Copeland IS-LM revision Exchange rates and Money
More informationIntermediate Macroeconomic Theory II, Fall 2006 Solutions to Problem Set 4 (35 points)
Intermediate Macroeconomic Theory II, Fall 2006 Solutions to Problem Set 4 (35 points) 1. (16 points) For all of the questions below, draw the relevant curves. (a) (2 points) Suppose that the government
More informationChapter 22 THE MUNDELL-FLEMING MODEL WITH PARTIAL INTERNATIONAL CAPITAL MOBILITY
Chapter 22 THE MUNDELL-FLEMING MODEL WITH PARTIAL INTERNATIONAL CAPITAL MOBILITY This chapter extends the Keynesian model to allow for international trade in assets in the context of fixed exchange rates
More informationAGGREGATE DEMAND. 1. Keynes s Theory
AGGREGATE DEMAND 1. Keynes s Theory - John Maynard Keynes (1936) criticized classical theory for assuming that AS alone capital, labor, and technology determines national income proposed that low AD is
More information14.02 PRINCIPLES OF MACROECONOMICS QUIZ 3 05/10/2012
14.02 PRINCIPLES OF MACROECONOMICS QUIZ 3 05/10/2012 PROFESSOR: FRANCESCO GIAVAZZI NAME: FRIDAY RECITATION: 1. True/False/Uncertain [30 points] Please state whether each of the following claims are true,
More informationfile:///c:/users/moha/desktop/mac8e/new folder (13)/CourseComp...
file:///c:/users/moha/desktop/mac8e/new folder (13)/CourseComp... COURSES > BA121 > CONTROL PANEL > POOL MANAGER > POOL CANVAS Add, modify, and remove questions. Select a question type from the Add drop-down
More informationUniversity of Toronto July 15, 2016 ECO 209Y L0101 MACROECONOMIC THEORY. Term Test #2
Department of Economics Prof. Gustavo Indart University of Toronto July 15, 2016 SOLUTIONS ECO 209Y L0101 MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total
More informationECO 209Y MACROECONOMIC THEORY AND POLICY. Term Test #2. December 13, 2017
ECO 209Y MACROECONOMIC THEORY AND POLICY Term Test #2 December 13, 2017 U of T E-MAIL: @MAIL.UTORONTO.CA SURNAME (LAST NAME): GIVEN NAME (FIRST NAME): UTORID (e.g., LIHAO118): INSTRUCTIONS: The total time
More informationRetake Exam in Macroeconomics, IB and IBP
Copenhagen Business School, Department of Economics, Birthe Larsen Question A Retake Exam in Macroeconomics, IB and IBP Answers 4hoursclosedbookexam 14th of August 2009 All questions, A,B,C and D are weighted
More informationUNIVERSITY OF TORONTO Faculty of Arts and Science. August Examination 2017 ECO 209Y. Duration: 2 hours
UNIVERSITY OF TORONTO Faculty of Arts and Science August Examination 2017 ECO 209Y Duration: 2 hours Examination Aids allowed: A non-programmable calculator LAST NAME FIRST NAME STUDENT NUMBER DO NOT WRITE
More informationExercise 3 Short Run Determination of Output, the Interest Rate, the Exchange Rate and the Current Account in a Mundell Fleming Model
Fletcher School, Tufts University Exercise 3 Short Run Determination of Output, the Interest Rate, the Exchange Rate and the Current Account in a Mundell Fleming Model E212 Macroeconomics Prof. George
More informationECO 209Y MACROECONOMIC THEORY AND POLICY
Department of Economics Prof. Gustavo Indart University of Toronto February 14, 2014 ECO 209Y MACROECONOMIC THEORY AND POLICY Term Test # 3 LAST NAME FIRST NAME STUDENT NUMBER Indicate your section of
More information1 Figure 1 (A) shows what the IS LM model looks like for the case in which the Fed holds the
1 Figure 1 (A) shows what the IS LM model looks like for the case in which the Fed holds the money supply constant. Figure 1 (B) shows what the model looks like if the Fed adjusts the money supply to hold
More informationUniversity of Toronto July 27, 2006 ECO 209Y - L5101 MACROECONOMIC THEORY. Term Test #2 DO NOT WRITE IN THIS SPACE. Part I /30.
Department of Economics Prof. Gustavo Indart University of Toronto July 27, 2006 SOLUTION ECO 209Y - L5101 MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME INSTRUCTIONS: STUDENT NUMBER 1. The total
More informationEconomics, 6th ed., 2016, Prof. Dr. P. Zamaros. presentation 29 policy dilemmas & stablization
presentation 29 policy dilemmas & stablization Dilemmas It is said that state fiscal and monetary policies are effective when they result in changing the shot-run equilibrium by shifting AD to the right
More information14.02 Quiz 3. Time Allowed: 90 minutes. Fall 2012
14.02 Quiz 3 Time Allowed: 90 minutes Fall 2012 NAME: MIT ID: FRIDAY RECITATION: FRIDAY RECITATION TA: This quiz has a total of 3 parts/questions. The first part has 13 multiple choice questions where
More informationThe Impact of an Increase In The Money Supply and Government Spending In The UK Economy
The Impact of an Increase In The Money Supply and Government Spending In The UK Economy 1/11/2016 Abstract The international economic medium has evolved in the direction of financial integration. In the
More information14.02 Principles of Macroeconomics Fall 2004
14.02 Principles of Macroeconomics Fall 2004 Quiz 2 Thursday, November 4, 2004 7:30 PM 9 PM Please, answer the following questions. Write your answers directly on the quiz. You can achieve a total of 100
More informationThe Mundell-Fleming-Tobin model
The Mundell-Fleming-Tobin model Lecture 11, ECON 4330 Nicolai Ellingsen (Adopted from Asbjørn Rødseth) April 15, 2015 Nicolai Ellingsen (Adopted from Asbjørn Rødseth) ECON 4330 April 15, 2015 1 / 40 Outline
More informationSAMPLE EXAM QUESTIONS FOR FALL 2018 ECON3310 MIDTERM 2
SAMPLE EXAM QUESTIONS FOR FALL 2018 ECON3310 MIDTERM 2 Contents: Chs 5, 6, 8, 9, 10, 11 and 12. PART I. Short questions: 3 out of 4 (30% of total marks) 1. Assume that in a small open economy where full
More informationYORK UNIVERSITY. Suggested Solutions to Part C (C3(d) and C4)
Page 1 of 5 Pages YORK UNIVERSITY Atkinson College Department of Economics ECON 2450 - Midterm Examination July 13, 2006 Suggested Solutions to Part C (C3(d) and C4) C3 (d). Derive and graph an equation
More informationFoundations of Modern Macroeconomics Third Edition
Foundations of Modern Macroeconomics Third Edition Chapter 2: The open economy Ben J. Heijdra Department of Economics, Econometrics & Finance University of Groningen 13 December 2016 Foundations of Modern
More informationPolicy in Papua New Guinea: releasing the golden bullet
Policy in Papua New Guinea: releasing the golden bullet Martin Davies Washington and Lee University and Development Policy Center, Crawford School of Public Policy, Australian National University Outline
More informationUniversity of Toronto June 17, 2002 ECO 208Y - L5101 MACROECONOMIC THEORY. Term Test #1 LAST NAME FIRST NAME
Department of Economics Prof. Gustavo Indart University of Toronto June 17, 2002 SOLUTION ECO 208Y - L5101 MACROECONOMIC THEORY Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total
More informationBusiness Cycles in. Mundell Fleming with Fixed Exchange Rates. Andrew Rose, Global Macroeconomics 10
Business Cycles in the Open Economy Mundell Fleming with Fixed Exchange Rates 1 Three Important Assumptions Prices are Sticky Business Cycle Model, Short Run Capital is Internationally Mobile No Substantial
More informationEC 205 Lecture 20 04/05/15
EC 205 Lecture 20 04/05/15 Remaining material till the end of the semester: Finish Chp 14 (1 subsection left) Open economy version of IS-LM (Chp 6.1&6.3+13) Chp 16 OR Dynamic macro models (As time permits)
More informationECO 209Y MACROECONOMIC THEORY AND POLICY LECTURE 12: THE DERIVATION OF THE AGGREGATE DEMAND CURVE
ECO 209 MACROECONOMIC THEOR AND POLIC LECTURE 12: THE DERIVATION OF THE AGGREGATE DEMAND CURVE Gustavo Indart Slide 1 FIXED-PRICE MODEL Everything we have done in the IS-LM model has been in terms of demand,
More informationThe Mundell-Fleming-Tobin Model
The Mundell-Fleming-Tobin Model Lecture 11, ECON 4330 Inga Heiland (adapted slides from A. Rødseth & N. Ellingsen) April 10/17, 2018 Inga Heiland ECON 4330 April 10/17, 2018 1 / 40 Outline Outline 1 Money
More informationTOPIC 9. International Economics
TOPIC 9 International Economics 2 Goals of Topic 9 What is the exchange rate? NX back!! What is the link between the exchange rate and net exports? What is the trade deficit? How do different shocks affect
More informationGehrke: Macroeconomics Winter term 2012/13. Exercises
Gehrke: 320.120 Macroeconomics Winter term 2012/13 Questions #1 (National accounts) Exercises 1.1 What are the differences between the nominal gross domestic product and the real net national income? 1.2
More informationTAMPERE ECONOMIC WORKING PAPERS NET SERIES
TAMPERE ECONOMIC WORKING PAPERS NET SERIES A NOTE ON THE MUNDELL-FLEMING MODEL: POLICY IMPLICATIONS ON FACTOR MIGRATION Hannu Laurila Working Paper 57 August 2007 http://tampub.uta.fi/econet/wp57-2007.pdf
More informationLecture 12: Economic Fluctuations. Rob Godby University of Wyoming
Lecture 12: Economic Fluctuations Rob Godby University of Wyoming Short-Run Economic Fluctuations Economic activity fluctuates from year to year. In some years, the production of goods and services rises.
More informationChapter 19 Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply
Chapter 19 Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply As it is the nominal or money price of goods, therefore, which finally determines the prudence or imprudence of all
More informationChapter 12 Aggregate Demand II: Applying the IS -LM Model
Chapter 12 Aggregate Demand II: Applying the IS -LM Model Modified by un Wang Eco 3203 Intermediate Macroeconomics Florida International University Summer 2017 2016 Worth Publishers, all rights reserved
More informationIntermediate Macroeconomics-ECO 3203
Intermediate Macroeconomics-ECO 3203 Homework 3 Solution, Summer 2017 Instructor, Yun Wang Instructions: The full points of this homework exercise is 100. Show all your works (necessary steps to get the
More informationCheck your understanding: The IS-LM-BP model
Check your understanding: The IS-LM-BP model EC 140 September 6, 2017 A simplified discussion of the IS-LM-BP model. IS-LM-BP Mundell-Fleming Model based on idea that capital flows must offset trade deficits
More informationmacro macroeconomics Aggregate Demand in the Open Economy N. Gregory Mankiw CHAPTER TWELVE PowerPoint Slides by Ron Cronovich fifth edition
macro CHAPTER TWELVE Aggregate Demand in the Open Economy macroeconomics fifth edition N. Gregory Mankiw PowerPoint Slides by Ron Cronovich 2002 Worth Publishers, all rights reserved Learning objectives
More informationMonetary Macroeconomics Lecture 5. Mark Hayes
Diploma Macro Paper 2 Monetary Macroeconomics Lecture 5 Aggregate demand: external trade Mark Hayes slide 1 Exogenous: M, G, T, i, π e Goods market KX and IS (Y, C, I) Money market (LM) (i, Y) Labour market
More informationMacroeconomics II The Small Open Economy IS-LM - Mundell-Fleming Model
Macroeconomics II The Small Open Economy IS-LM - Mundell-Fleming Model Vahagn Jerbashian Ch. 12 from Mankiw (2010, 2003) Spring 2018 Where we are and where we are heading to Today we will consider the
More informationQUEEN S UNIVERSITY FACULTY OF ARTS AND SCIENCE DEPARTMENT OF ECONOMICS. Economics 222 A&B Macroeconomic Theory I. Final Examination 20 April 2009
Page 1 of 9 QUEEN S UNIVERSITY FACULTY OF ARTS AND SCIENCE DEPARTMENT OF ECONOMICS Economics 222 A&B Macroeconomic Theory I Final Examination 20 April 2009 Instructors: Nicolas-Guillaume Martineau (Section
More informationMonetary Macroeconomics Lecture 3. Mark Hayes
Diploma Macro Paper 2 Monetary Macroeconomics Lecture 3 Aggregate demand: Investment and the IS-LM model Mark Hayes slide 1 Outline Introduction Map of the AD-AS model This lecture, continue explaining
More informationTHE UNIVERSITY OF HONG KONG School of Economics & Finance st Semester Examination. Economics: ECON0302 International Finance Dr C W Yuen
School of Economics & Finance 2004-2005 1st Semester Examination Economics: ECON0302 December 15, 2004 2:30-4:30p.m. OPEN BOOK. Answer ALL questions in the space provided. True/False/Uncertain Questions
More informationName: Intermediate Macroeconomic Theory II, Fall 2009 Instructor: Dmytro Hryshko Final Exam (35 points). December 8.
Name: Intermediate Macroeconomic Theory II, Fall 2009 Instructor: Dmytro Hryshko Final Exam (35 points). December 8. 1. (5 points) Suppose that the only shocks in the economy are changes in the assessments
More informationPrices and Output in an Open Economy: Aggregate Demand and Aggregate Supply
Prices and Output in an Open conomy: Aggregate Demand and Aggregate Supply chapter LARNING GOALS: After reading this chapter, you should be able to: Understand how short- and long-run equilibrium is reached
More informationThe Mundell-Fleming model
The Mundell-Fleming model dr hab. Bartłomiej Rokicki Chair of Macroeconomics and International Trade Theory Faculty of Economic Sciences, University of Warsaw Main assumptions of the model Small open economy
More informationIntroduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations slide 0 In this chapter, you will learn facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an
More information14.02 Solutions Quiz III Spring 03
Multiple Choice Questions (28/100): Please circle the correct answer for each of the 7 multiple-choice questions. In each question, only one of the answers is correct. Each question counts 4 points. 1.
More informationPart I (45 points; Mark your answers in a SCANTRON)
Final Examination Name: ECON 4020/ SPRING 2005 Instructor: Dr. M. Nirei 1:30 3:20 pm, April 28, 2005 Part I (45 points; Mark your answers in a SCANTRON) (1) The GDP deflator is equal to: a. the ratio of
More informationIntermediate Macroeconomic Theory II, Winter 2009 Solutions to Problem Set 2.
Intermediate Macroeconomic Theory II, Winter 2009 Solutions to Problem Set 2. 1. (14 points, 2 points each) Indicate for each of the statements below whether it is true or false, or elaborate on a statement
More informationUNIVERSITY OF TORONTO Faculty of Arts and Science. August Examination 2006 ECO 209Y
UNIVERSITY OF TORONTO Faculty of Arts and Science August Examination 2006 ECO 209Y Duration: 2 hours Examination Aids allowed: Non-programmable calculators only INSTRUCTIONS: Students are required to answer
More informationMacroeconomic Theory and Policy
ECO 209 Macroeconomic Theory and Policy Lecture 8: The Open Economy with Flexible Exchange Rates Gustavo Indart Slide 1 Assumptions We will assume that initially the goods market, the money market, and
More informationECO 209Y MACROECONOMIC THEORY AND POLICY
Department of Economics Prof. Gustavo Indart University of Toronto December 4, 2013 ECO 209Y MACROECONOMIC THEORY AND POLICY Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER Indicate your section of the
More informationEC 205 Macroeconomics I. Lecture 19
EC 205 Macroeconomics I Lecture 19 Macroeconomics I Chapter 12: Aggregate Demand II: Applying the IS-LM Model Equilibrium in the IS-LM model The IS curve represents equilibrium in the goods market. r LM
More information5. An increase in government spending is represented as a:
Romer Section 1 1. The IS curve represents combinations of Y and r that: a. are consistent with equilibrium in the money market. b. are consistent with equilibrium in the goods market. c. are positively
More informationChapter 23. Aggregate Supply and Aggregate Demand in the Short Run. In this chapter you will learn to. The Demand Side of the Economy
Chapter 23 Aggregate Supply and Aggregate Demand in the Short Run In this chapter you will learn to 1. Explain why an exogenous change in the price level shifts the AE curve and changes the equilibrium
More informationUNIVERSITY OF TORONTO Faculty of Arts and Science. August Examination 2013 ECO 209Y. Duration: 2 hours
UNIVERSITY OF TORONTO Faculty of Arts and Science August Examination 2013 ECO 209Y Duration: 2 hours Examination Aids allowed: Non-programmable calculators only LAST NAME FIRST NAME STUDENT NUMBER DO NOT
More information7.1 Assumptions: prices sticky in SR, but flex in MR, endogenous expectations
7 Lecture 7(I): Exchange rate overshooting - Dornbusch model Reference: Krugman-Obstfeld, p. 356-365 7.1 Assumptions: prices sticky in SR, but flex in MR, endogenous expectations Clearly it applies only
More informationChapter 7 Fixed Exchange Rate Regimes and Short Run Macroeconomic Policy
George Alogoskoufis, International Macroeconomics and Finance Chapter 7 Fixed Exchange Rate Regimes and Short Run Macroeconomic Policy Up to now we have been assuming that the exchange rate is determined
More informationECON 3560/5040 Week 8-9
ECON 3560/5040 Week 8-9 AGGREGATE DEMAND 1. Keynes s Theory - John Maynard Keynes (1936) criticized classical theory for assuming that AS alone capital, labor, and technology determines national income
More informationPart B (Long Questions)
Part B (Long Questions) Question B.1: Mundell-Fleming Model with Flexible Exchange Rates Suppose that a small open economy can be represented by the following model with a flexible exchange rate: C d =
More informationPrint last name: Given name: Student number: Section number
Department of Economics University of Toronto at Mississauga ECO202Y5Y Macroeconomic Theory and Policy December 2002 Test Two Instructor: X. Gu Date: Friday, December 6, 2002 Time allowed: Two hours Aids
More informationOpening the Economy. Topic 9
Opening the Economy Topic 9 Goals of Topic 9 What is the exchange rate? NX is back!! What is the link between the exchange rate and net exports? What is the trade deficit? How do different shocks affect
More informationCopenhagen Business School, Birthe Larsen, Exam in Macroeconomics, IB and IBP, Answers.
Copenhagen Business School, Birthe Larsen, Exam in Macroeconomics, IB and IBP, Answers. 4hoursclosedbookexam. 18 March 201 Question A Regard the following model for a closed economy 1. E = C + I + G, 2.
More information14.02 Principles of Macroeconomics Fall 2004
14.02 Principles of Macroeconomics Fall 2004 Quiz 1 Thursday, October 7, 2004 7:30 PM 9 PM Please, answer the following questions. Write your answers directly on the quiz. You can achieve a total of 100
More information9. ISLM model. Introduction to Economic Fluctuations CHAPTER 9. slide 0
9. ISLM model slide 0 In this lecture, you will learn an introduction to business cycle and aggregate demand the IS curve, and its relation to the Keynesian cross the loanable funds model the LM curve,
More informationLearning objectives. Macroeconomics I International Group Course Topic 8: AGGREGATE DEMAND IN AN OPEN ECONOMY
Learning objectives Macroeconomics I International Group Course 2004-2005 Topic 8: AGGREGATE DEMAND IN AN OPEN ECONOMY Here we extend the study of aggregate demand to a small open economy. Unlike the previous
More informationChapter 13 The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime
Chapter 13 The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime Modified by Yun Wang Eco 3203 Intermediate Macroeconomics Florida International University Summer 2017 2016
More informationUNIVERSITY OF TORONTO Faculty of Arts and Science APRIL/MAY EXAMINATIONS 2006 ECO 209Y1 Y. Duration: 2 hours
UNIVERSITY OF TORONTO Faculty of Arts and Science APRIL/MAY EXAMINATIONS 2006 ECO 209Y1 Y Duration: 2 hours Examination Aids allowed: Non-programmable calculator only There are five parts to the exam PART
More informationThe Open Economy Revisited: the Exchange-Rate Regime
C H A P T E R 12 : the Mundell-Fleming Model and the Exchange-Rate Regime MACROECONOMICS SIXTH EDITION N. GREGORY MANKIW PowerPoint Slides by Ron Cronovich 2008 Worth Publishers, all rights reserved In
More informationChapter 3. Continued. CHAPTER 3 National Income. slide 0
Chapter 3 Continued slide 0 Notes The equilibrium is stable If r > r* S > I: More people want to save relative to demand for funds: excess supply; r decreases If r < r* I > S: More demand for funds then
More informationGoals of Topic 8. NX back!! What is the link between the exchange rate and net exports? How do different policies affect the trade deficit?
TOPIC 8 International Economics Goals of Topic 8 What is the exchange rate? NX back!! What is the link between the exchange rate and net exports? What is the trade deficit? How do different shocks affect
More informationTutorial letter 204/1/2016. Macroeconomics ECS2602. Department of Economics Semester 1. Answers to Assignment 04
ECS2602/204/1/2016 Tutorial letter 204/1/2016 Macroeconomics ECS2602 Department of Economics Semester 1 Answers to Assignment 04 Answers to Self-assessment Assignment 05 Dear student In this tutorial letter
More informationECS2602. Tutorial letter 201/1/2018. Macroeconomics. Department of Economics First semester ECS2602/201/1/2018
ECS2602/201/1/2018 Tutorial letter 201/1/2018 Macroeconomics ECS2602 Department of Economics First semester Answers to Assignment 01 Answers to Assignment 02 Answers to Self-assessment Assignment 04 BARCODE
More informationSOLUTIONS ECO 209Y (L0201/L0401) MACROECONOMIC THEORY. Midterm Test #3. University of Toronto February 11, 2005 LAST NAME FIRST NAME STUDENT NUMBER
Department of Economics Prof. Gustavo Indart University of Toronto February 11, 2005 SOLUTIONS ECO 209Y (L0201/L0401) MACROECONOMIC THEORY Midterm Test #3 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS:
More informationECO 209Y L0101 MACROECONOMIC THEORY. Term Test #1
Department of Economics Prof. Gustavo Indart University of Toronto June 5, 2015 ECO 209Y L0101 MACROECONOMIC THEORY Term Test #1 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total time for
More information1. (16 points) For all of the questions below, draw the relevant curves.
Intermediate Macroeconomic Theory II, Fall 2006 Solutions to Problem Set 4 (35 points) 1. (16 points) For all of the questions below, draw the relevant curves. (a) (2 points) Suppose that the government
More information