Macroeconomics Theory

1. Define and explain the conditions underlying “short-run” analysis, and within this SR context, discuss the
effectiveness of expansionary fiscal and monetary in a “closed” economy (i.e where domestic “goods” and “money”
markets are in equilibrium and the rest-of-the-world in ignored).

2. Explain the mechanism(s) of monetary policy, including the uncertainties about their effective “transmission”
to the real world.

3. Explain the meaning of “perfect capital mobility” (pcm), and in this context (of pcm), discuss the
effectiveness of a “small” country’s expansionary fiscal and monetary policies under: a)a floating exchange rate;
and b) a fixed or pegged exchange rate.

4. Explain and discuss the effects of a large country’s expansionary fiscal and monetary policies on a small
country with which it has free trade and capital flows, when the latter has: a) a floating exchange rate; and b) a
fixed or pegged exchange rate.
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