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Macroeconomics 6/c/e
Macroeconomics, 6/e
Rudi Dornbusch, Massachusetts Institute of Technology
Stanley Fischer, International Monetary Fund, on leave from MIT
Richard Startz, University of Washington
Frank Atkins, University of Calgary
Gordon Sparks, Queen's University
International Adjustment: Aggregate Demand and Supply in an Open Economy

Chapter Objectives

After reading and studying this chapter, you should be able to:

Understand that national economies are linked through trade flows and exchange rates.

Understand that failure to keep exchange rates in line with prices ultimately leads to a devaluation crisis.

Understand that the monetary approach to the balance of payments emphasizes the connection between the changing domestic money supply and the level of the balance of payments.

Understand that, in the long run, a monetary expansion will depreciate the nominal exchange rate and raise the domestic price level, leaving the real exchange rate unaltered.




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