Final exam review

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Final Exam: Thursday, December 12th, 2:00-3:30

Ideas on the Final/Things You Should Be Able to Do

1.      Types of Demand for Money

a.      Transactions demand

b.      Precautionary demand

c.      Speculative demand (including the role of expectations)

d.      Savings demand

2.      Compare and contrast the major Money Demand/Money Supply Theories with respect to types of money demand and implications for monetary policy

a.      Quantity Theory of Money (Classical Theory), including the Equation of Exchange

b.      Cambridge Theory

c.      Liquidity Preference Theory

d.      Modern Quantity Theory of Money

3.      The idea, in general, behind the Balance of Payments

4.      Short term capital and long term capital (including direct investment and portfolio investment)

5.      The FX market

a.      Participants

b.      Exchange rates

c.      Weakening and strengthening of currencies

d.      Spot vs. future markets

e.      FX as competitive market

6.      The Crisis of 2008

a.      Who is to blame?

b.      Definition of a bubble

c.      Bubble ingredients (herding and leverage)

d.      Securitization of mortgages (CDOs, derivatives)

e.      The bursting of the bubble and the aftereffects

7.Freely Fluctuating Exchange Rate Systems

a.Determined by supply and demand

8.Stable Exchange Rate Systems

a.Why exchange rates would be controlled

b.Stabilization techniques (passive vs. active)

9.Controlled Exchange Rate Systems

10.Exchange Speculation and Capital Flight

 

Note: Italicized items will be on the final IF we have time to cover that material in class.