Exam 3 Study Guide

In part 3 of the course, we spend our time assembling and applying the IS-LM model. Thus, on Exam 3 I will ask you to demonstrate your knowledge of the construction and use of the model. In particular, you should

understand the aggregate expenditure (Keynesian-cross) model and be able to to use it to answer direct questions, as well as to derive the IS curve.
be able to derive the LM curve.
be able to solve for the IS and LM equations and find the slopes of the IS and LM curves.
be able to use the closed-economy IS-LM model to answer any "What if ...?" question I might ask.
be able to provide policy advice on the basis of the IS-LM model.
be able to apply the IS-LM model to the data from the Great Depression to examine competing hypotheses of what caused the Depression.
be able to discuss the limitations of the IS-LM model.
be able to derive the aggregate demand curve from the IS-LM model.
be able to derive the open-economy IS*-LM* model.
be able to use the IS*-LM* model to answer "What if ...?" questions.
be able to provide basic policy advice for the government of a small open economy, with either a fixed or flexible exchange rate..
be able to provide basic policy advice for the government of a large open economy.

That hardly seems like enough to test your knowledge, but I'm afraid that's all we've done. Sorry.

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