Lecture 12 – Final Exam ReviewOctober 4th, 2010

http://www.slideshare.net/saark/ibe303-lecture-12

Final Exam•Type:

▫Multiple choice•No. of questions:

▫50•Duration:

▫3 hours•Grade:

▫50% of final grade•Topics:

▫Everything after midterm (from Lecture 5 onward)

International Trade•Factor Endowments•Heckscher-Ohlin Model

▫Model assumptions▫Captial-Labor ratio▫Relative Factor Endowments

Factor Prices▫Trade in Neoclassical Model

•Stolper-Samuelson Theorem

Post-Hecscher-Ohlin Theories of Trade

•Posner’s Imitation Lag Hypothesis•Product Cycle Model•Vertical Specilization•Firm-focused Theories•The Linder Theory•The Krugman Model

Intra-Industry Trade•Causes of intra-industry trade

Economic Growth and International Trade•Trade effects of growth

▫Production Growth▫Consumption Growth

•Sources of Growth▫Factor Growth

Factor-neutral Growth in K Growth in L

•Cases▫Small country▫Large country

International Factor Movement•Types of capital foreign investment

▫Foreign Direct Investment (FDI) ▫Foreign Portfolio Investment (FPI)

•Market equilibrium

The Instruments of Trade Policy•Tariff

The Impact of Trade Policies•Consumer Surplus•Producer Surplus•Trade Restrictions

▫Partial equilibrium Small / Large country case

▫General equilibrium Small / Large country case

•Arguments for Interventionist Trade Policies

•Strategic Trade Policy

Balance of Payment•Growth of Trade•Capital Movements•BOP accounting

Foreign Exchange•Market for Foreign Exchange

▫Demand▫Supply

•Spot Market•Arbitrage•Absolute/Relative PPP•Forward Market•Hedging

Foreign Exchange and Financial Market•Link between Foreign Exchange and

Financial Markets•Financial and Exchange rate adjustments•The Eurodollar market•International Bond Market•International Stock Market•Derivatives•Exchange Rate Overshooting

Monetary And Portfolio Balance Approaches• Monetary Approach

▫BOP▫Money supply▫Money demand▫Monetary equilibrium▫Exchange rate

• Portfolio Approach▫BOP▫Money supply▫Money demand▫Monetary equilibrium▫Exchange rate

Price Adjustments and Balance-of-Payments Disequilibrium•Price Adjustment mechanism•Current Account under flexible rate•Demand and Supply of foreign exchange•The Marshall-Lerner Condition

Current Account and National Income

•Keynesian Income Model•Price and Income Adjustments •Internal and External Balance

Economic Policy•Open economy under fixed exchange rate

▫Money market equilibrium▫Real Sector equilibrium▫BOP equilibrium▫Fiscal policy▫Monetary policy

•Open economy under flexible exchange rate▫Fiscal policy▫Monetary policy▫Effects of shocks