massign14 - Money and Banking N. Sheflin ASSIGNMENT 14...

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Money and Banking N. Sheflin ASSIGNMENT 14 NOTES : Taste of International Economics, Foreign Exchange Markets, International Finance, and Open Economy Monetary Policy – Lots here – start early, will have to read additional material cited. Essential Questions, Review Guide, Q&A schedule – later this week Final Exam Conflicts, special accommodations – see me after class NOW if you have not already. READING Croushore 14 AND Fed Point piece on floating exchange rates at http://www.ny.frb.org/aboutthefed/fedpoint/fed44.html Fed Point piece on fixed exchange rates at http://www.ny.frb.org/aboutthefed/fedpoint/fed38.html Fed Point on Balance of Payments at http://www.ny.frb.org/aboutthefed/fedpoint/fed40.html And take a quick look at Table 1 in http://www.bea.gov/newsreleases/international/transactions/transnewsrelease.htm http://gregmankiw.blogspot.com/2010/07/trilemma.html Mankiw on the Trilemma and perhaps: Globalization at http://www.frbsf.org/publications/economics/letter/2004/el2004-12.html http://en.wikipedia.org/wiki/Foreign_exchange_market and http://www.investopedia.com/articles/trading/03/091703.asp and You may also want to look at sections of the New York Fed’s International Publication: http://www.newyorkfed.org/education/fx/growing.html foreign exchange and role of central banks. Look at more on international exchange issues http://www.newyorkfed.org/education/fx/foreign.html For even more, FX Market outline with more details: http://app.ny.frb.org/cfcbsweb/rosenberg.pdf ((If you need a somewhat longer treatment of these topics, try: http://www.flatworldknowledge.com/pub/1.0/principles-macroeconomics/29937#book-30059 and then use the table of contents (detailed view) on the left to go to Chapter 10 - Financial markets and the Economy , section 1, just the portion on Exchange Rates . Also chapter 15: Net Exports and International Finance (if the links don’t work, copy and paste them into the address bar of your browser or google flatworldknowledge and look for the Macro Principles text). KEY POINTS read 3 times, carefully - once before the book, once after and during hw 1. Free Trade is potentially beneficial to all trading partners, although not necessarily equally so o Due to comparative advantage, that is when countries specialize in whatever production they have a relative advantage in (lowest opportunity cost ) o Also, trade leads to increased competition and transmission of ideas and technology o Thus barriers to trade are ‘bad’ o Quota’s, tariffs, restrictions on dumping all reduce gains from trade. Attempts to ‘save jobs’ are very expensive per job and inefficient ± However, trying to assist those who lose jobs with retraining, tax breaks etc may be morally and politically ‘good’ 2. Impact of Open Economy on Macroeconomic issues o X increases aggregate D, M reduces it (D=C+I+G+X-M) ± determinants of X - $, foreign income - note using $ to mean dollar exchange rate with other currencies; example # yen per dollar
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massign14 - Money and Banking N. Sheflin ASSIGNMENT 14...

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