Review Guide for the Last Exam:  Economics 270: International Economics

I.          review the material from study guide 3 on line

II.        Macroeconomic equilibrium and exchange rates

            A.        Review aggregate demand and (short run) aggregate supply

                                    1.         Movement along versus a shift in the curve

                                    2.         Equilibrium and impact of changes in AD and/or AS

            B.        Income and “price” elasticity of exports and imports

                                    1.         Understand elasticity

                                    2.         Income elasticity of demand for exports

                                    3.         Price (exchange rate) elasticity of demand for exports

                                    4.         Nos. 2 and 3 for imports

            C.        Exchange rate changes and impact on macroeconomic equilibrium

                                    1.         Current account

                                    2.         Changes in aggregate demand

                                    3.         Exchange rate shocks

III.       Macroeconomic policy under floating exchange rates

            A.        Internal and External balances

            B.        Review: Loanable funds market and the money market: interest rates

            C.        Fiscal Policy

                                    1.         Expansionary

                                    2.         Contractionary

                                    3.         BE SURE to be able to determine impact on key variables of

                                                changes in aggregate demand via fiscal policies

            D.        Monetary Policy: same as for fiscal policy

            E.        Policy mixes: the four possibilities we discussed in class

IV.       Fixed exchange rates and macroeconomic policy

            A.        Why fixed exchange rates

            B.        How to maintain an over/under valued currency

            C.        Devaluation and Revaluation

            D.        Fiscal and monetary policies under fixed exchange rates

                        (same as for III C and D)

V.        the Choice: don’t neglect to finish reading the book !!!