1. ISLMBP Applications to EMU Economics

2. ISLMBP Applications to EMU Economics 1) Fixed Exchange Rates, Fiscal Policy, Low Capital Mobility 2) Fixed Exchange Rates, Fiscal Policy, High Capital Mobility 3) Fixed Exchange Rates, Monetary Policy, Low Capital Mobility 4) Fixed Exchange Rates, Monetary Policy, High Capital Mobility 1) Fixed Exchange Rates, Fiscal Policy, Low Capital Mobility 2) Fixed Exchange Rates, Fiscal Policy, High Capital Mobility 3) Fixed Exchange Rates, Monetary Policy, Low Capital Mobility 4) Fixed Exchange Rates, Monetary Policy, High Capital Mobility

3. ISLMBP Applications to EMU Economics 5) Flexible Exchange Rates, Fiscal Policy, Low Capital Mobility 6) Flexible Exchange Rates, Fiscal Policy, High Capital Mobility 7) Flexible Exchange Rates, Monetary Policy, High Capital Mobility 5) Flexible Exchange Rates, Fiscal Policy, Low Capital Mobility 6) Flexible Exchange Rates, Fiscal Policy, High Capital Mobility 7) Flexible Exchange Rates, Monetary Policy, High Capital Mobility

4. O Y BP LM 1 IS 1 r1r1 Y1Y1 a 1. Fixed exchange rates, Fiscal Policy, Low Capital Mobility

5. O r Y BP LM 1 IS 1 r1r1 Y1Y1 An expansionary fiscal policy: IS 2 a 1. Fixed exchange rates, Fiscal Policy, Low Capital Mobility

6. a O r Y BP LM 1 IS 1 r1r1 Y1Y1 An expansionary fiscal policy: BP curve steeper than LM curve IS 2 r2r2 b Y2Y2 1. Fixed exchange rates, Fiscal Policy, Low Capital Mobility

7. O r Y BP LM 1 IS 1 r1r1 Y1Y1 An expansionary fiscal policy: BP curve steeper than LM curve IS 2 a r2r2 b Y2Y2 1. Fixed exchange rates, Fiscal Policy, Low Capital Mobility

8. O r Y BP LM 1 IS 1 r1r1 Y1Y1 An expansionary fiscal policy: IS 2 a r2r2 b Y2Y2 Restoration of full equilibrium LM 2 r3r3 Y3Y3 c 1. Fixed exchange rates, Fiscal Policy, Low Capital Mobility

9. 2. Fixed exchange rates, Fiscal Policy, High Capital Mobility O Y BP LM IS r1r1 Y1Y1 a

10. O Y BP LM 1 IS 1 r1r1 Y1Y1 An expansionary fiscal policy IS 2 a r2r2 Y2Y2 b 2. Fixed exchange rates, Fiscal Policy, High Capital M obility

11. O r Y BP LM 1 IS 1 a r1r1 Y1Y1 IS 2 r2r2 b Y2Y2 2. Fixed exchange rates, Fiscal Policy, High Capital Mobility

12. O r Y BP LM 1 IS 1 a r1r1 Y1Y1 IS 2 r2r2 b Y2Y2 Restoration of full equilibrium LM 2 r3r3 Y3Y3 c 2. Fixed exchange rates, Fiscal Policy, High Capital Mobility

13. O r Y BP LM 1 IS a r1r1 Y1Y1 An expansionary monetary policy 3. Fixed exchange rates, Monetary Policy, High Capital Mobility

14. O r Y BP LM 1 IS a r1r1 Y1Y1 An expansionary monetary policy LM 2 Y2Y2 r2r2 b 3. Fixed exchange rates, Monetary Policy, High Capital Mobility

15. O r Y BP LM 1 IS a r1r1 Y1Y1 An expansionary monetary policy Y2Y2 LM 2 r2r2 b 3. Fixed exchange rates, Monetary Policy, High Capital Mobility

16. O r Y BP LM 1 IS a r1r1 Y1Y1 An expansionary monetary policy Y2Y2 LM 2 r2r2 b Full equilibrium is restored back at point a ISLMBP analysis: fixed exchange rates

17. Analysis under free-floating rates –effects of exchange rate changes on the BP curve Analysis under free-floating rates –effects of exchange rate changes on the BP curve THE OPEN ECONOMY AND ISLM ANALYSIS

18. O r Y BP SURPLUS Movements in the BP curve Appreciation

19. O r Y BP DEFICIT Depreciation Movements in the BP curve

20. O r Y BP LM IS 1 Y1Y1 An expansionary fiscal policy IS 2 Y2Y2 r1r1 r2r2 b a ISLMBP analysis: floating exchange rates

21. O r Y BP LM IS 1 Y1Y1 An expansionary fiscal policy IS 2 a Y2Y2 r1r1 r2r2 b ISLMBP analysis: floating exchange rates

22. O r Y BP LM IS 1 Y1Y1 An expansionary fiscal policy IS 2 a Y2Y2 r1r1 r2r2 b ISLMBP analysis: floating exchange rates

23. O r Y BP 1 LM IS 1 Y1Y1 An expansionary fiscal policy IS 2 a Y2Y2 r1r1 r2r2 b Full equilibrium is restored at point c BP 2 IS 3 Y3Y3 r3r3 c ISLMBP analysis: floating exchange rates

24. O r Y LM BP 1 IS 1 Y1Y1 An expansionary fiscal policy: BP curve steeper than LM curve a r1r1 IS 2 Y2Y2 r2r2 b ISLMBP analysis: floating exchange rates

25. O r Y LM BP 1 IS 1 Y1Y1 An expansionary fiscal policy: BP curve steeper than LM curve a Y2Y2 r1r1 r2r2 b IS 2 ISLMBP analysis: floating exchange rates

26. O r Y LM BP 1 IS 1 Y1Y1 An expansionary fiscal policy: BP curve steeper than LM curve a Y2Y2 r1r1 r2r2 b IS 2 ISLMBP analysis: floating exchange rates

27. O r Y LM BP 1 IS 1 Y1Y1 An expansionary fiscal policy: BP curve steeper than LM curve IS 3 a Y2Y2 r1r1 r2r2 b BP 2 IS 2 Y3Y3 r3r3 c Full equilibrium is achieved at point c ISLMBP analysis: floating exchange rates

28. O r Y LM 1 IS 1 Y1Y1 An expansionary monetary policy a Y2Y2 r1r1 r2r2 BP 1 LM 2 b ISLMBP analysis: floating exchange rates

29. O r Y LM 1 IS 1 Y1Y1 An expansionary monetary policy a Y2Y2 r1r1 r2r2 b The balance of payments deficit causes the BP line to shift downward BP 1 LM 2 ISLMBP analysis: floating exchange rates

30. O r Y LM 1 IS 1 Y1Y1 An expansionary monetary policy a Y2Y2 r1r1 r2r2 b The depreciation causes the IS curve to shift to the right BP 1 LM 2 ISLMBP analysis: floating exchange rates

31. O r Y BP 2 LM 1 IS 1 Y1Y1 An expansionary monetary policy a Y2Y2 r1r1 r2r2 b Full equilibrium is restored at point c BP 1 IS 2 Y3Y3 r3r3 LM 2 c ISLMBP analysis: floating exchange rates