Lecture19 - Announcements: Problem sets to remainder of...

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Announcements: Problem sets to remainder of course PS7 due today PS8 due next Tuesday Nov 30 PS9 due Dec 7 Professor Shapiro’s office hours cancelled tomorrow Comments on midterm #2 Midterm #2 Statistics
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Midterm #2 Curve Important notices: •This curve is advisory only. Final curve is based on cumulative scores as described in course outline. Approximate mapping of MT2 scores (out of 80 points) to letter grades (cutoffs are approximate): •Score 80-62: A+ to A- •Score 62-44: B+ to B- •Score 44-41: C+ to C- •Score 40-35: borderline •Score >35: serious concern Readings: Open Economy Previous lecture: Full employment: Ch 5 Mundell-Fleming: Ch 12 TODAY Large open economy: Ch 12, appendix Charles Schultze, “The Saving-Investment Balance, Not Trade Policy, Determines a Country’s Trade Balance” Economist “Yuan-Dollar Exchange Rate” Readings: Next Week Mankiw, Money Supply, Chapter 19, Section 1 only (pp. 547-556) Ball-Mankiw, Financial Crises chapter (CTools) “‘Quantitative easing’ is unloved and unappreciated—but it is working,” Economist Nov 6, 2010 (CTools) Mankiw, Stabilization Policy, Chapter 15 (skim)
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Review: National income (Y – C – T ) + (T – G) – I = NX S – I = NX Closed economy: National saving = National Investment Open economy: National saving – National Investment = Trade balance Review: Market clearing Closed economy NX = S I ( r ) = 0 Æ r Small open economy r * = world interest rate NX( ε ) = S I ( r * ) Æ ε Preview : Market clearing Large open economy CF = capital outflows CF(r) = NX( ε ) = S I ( r ) Æ ε and r
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Review: Nominal variables in long run Y fixed at full employment Closed economy inflation proportional to money growth Small open economy real exchange rate constant nominal exchange rate
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Lecture19 - Announcements: Problem sets to remainder of...

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