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Contents

CHAPTER 16

Macroeconomic Policy in an Open Economy ..................................... 495

Economic Objectives of Nations ................... 495 Policy Instruments .................................... 496

Aggregate Demand and Aggregate Supply: A Brief Review ......................................... 496

Macroeconomic Stability and the Current Account: Policy Agreement Versus Policy Conflict ......................................... 504

Inflation With Unemployment ..................... 505

Monetary and Fiscal Policy Respond to Financial Turmoil in the Economy ............ 497

International Economic-Policy Coordination ........................................... 506

Monetary and Fiscal Policy in a Closed Economy ....................................... 498

Monetary and Fiscal Policy in an Open Economy ........................................ 500

Does Crowding Occur in an Open Economy? .................................... 501

Effect of Fiscal and Monetary Policy Under Fixed Exchange Rates ............................. 502

G-20 Agrees to Cooperate on Global Economic Policy: International Policy Coordination ........................................ 507

Policy Coordination in Theory .................. 508 Does Policy Coordination Work? ............... 509 Summary ................................................ 510 Key Concepts & Terms .............................. 511 Study Questions ....................................... 511

Effect of Fiscal and Monetary Policy Under Floating Exchange Rates ......................... 503

CHAPTER 17

International Banking: Reserves, Debt, and Risk ................................. 513

Nature of International Reserves .................. Demand for International Reserves ...............

Exchange-Rate Flexibility ........................ Other Determinants ............................... Supply of International Reserves ................... Foreign Currencies .................................... Should SDRs Replace the Dollar as

513 514 514 516 517 517

IMF Drawings ...................................... General Arrangements to Borrow .............. Swap Arrangements ............................... International Lending Risk .......................... The Problem of International Debt ...............

Dealing with Debt-Servicing Difficulties ...........................................

525 525 526 526 527

528

the Worlds Reserve Currency? ................ 518

Gold ......................................................

International Gold Standard .................... Gold Exchange Standard ......................... Demonetization of Gold .......................... Special Drawing Rights .............................. F a c i l i t i e s f o r B o r r o w i n g R e s e r v e s ..................

521 521 522 523 524 524

Reducing Bank Exposure to Developing- Nation Debt ............................................

Debt Reduction and Debt Forgiveness ........... The Eurodollar Market ............................... Summary ................................................ Key Concepts & Terms .............................. Study Questions .......................................

529 530 531 532 532 533

Glossary .................................................................................... 535 Index ........................................................................................ 547

Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.

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