• Unit 3: Exchange Rates and Open-Economy Macroeconomics

    The previous units were concerned primarily with the problem of making the best use of the world's scarce productive resources at a single point in time. In this unit, we shift our focus and ask: How can economic policy ensure that factors of production are fully employed? And what determines how an economy's capacity to produce goods and services changes over time? We will learn how the interactions between national economies influence the worldwide pattern of macroeconomic activity. We will also discuss the role of trade in growth and welfare in an open economy, the causes and consequences of factor mobility, as well as the role of multinationals.

    Completing this unit should take you approximately 10 hours.

    • 3.1: National Income Accounting and the Balance of Payments

    • 3.2: Exchange Rates and the Foreign Exchange Market: An Asset Approach

    • 3.3: Money, Interest Rates, and Exchange Rates

    • 3.4: Price Levels and the Exchange Rate in the Long Run

    • 3.5: Output and the Exchange Rate in the Short Run

    • 3.6: Fixed Exchange Rates and Foreign Exchange Rates