Econ_102_01__-_Review_Summary_Final_Exam

Econ_102_01__-_Review_Summary_Final_Exam - Econ 102(01)...

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Econ 102(01) – Final Exam Review Summary S09 1 Please note that the final exam covers the entire semester’s material.  However, this review  summary is for  material covered since midterm 3 only. Chapter 12:  Open Economy Macroeconomics:  Some Basic Concepts Balance of Payments o Current Account o Capital Account o Capital inflow o Capital outflow o Debits (Payments)/Credits (Receipts) o Capital Inflow o Capital Outflow o Official Settlements Balance Nominal Exchange Rate o Appreciation  o Depreciation The Foreign Exchange Market o Demand for Canadian dollars o Supply of Canadian dollars o FXR – nominal exchange rate Factors that Shift the Demand and Supply Curves for Canadian Dollars o An increase in the domestic price level relative to the foreign price level o An increase in domestic interest rates relative to foreign interest rates o A change in investor confidence o Can be caused by: o A change in policy o An unexpected positive development o Political stability o External developments Real Exchange Rate o e = enom * P P F Purchasing Power Parity o The law of one price
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Econ 102(01) – Final Exam Review Summary S09 2 Interest Rate Parity o Definition
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Econ 102(01) – Final Exam Review Summary S09 3 Interest Rate Parity (IRP) o Prevails when: o (1 + i) = e nom (1 + i F ) e f nom o Achieving interest rate parity Foreign Exchange Rate Systems o Flexible Exchange Rate System o Fixed Exchange Rate System Chapter 14:  Aggregate Demand and Aggregate Supply
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Econ_102_01__-_Review_Summary_Final_Exam - Econ 102(01)...

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