Macroeconomics Final Exam Guidelines and Course Roadmap

Final Exam Guidelines

Exam Logistics

• Date & Time: Wednesday, December 10, 12:30–14:30, Sports Hall.

• Exam Format: Closed-book. Calculators are allowed, but no other electronic devices.

• Identification: Bring your student ID card or a photo ID for verification.

Exam Structure

• Comprehensive Coverage: The exam covers all course material, with greater emphasis on open economy IS-LM-UIP and closed-economy AS-AD models.

• Style: Similar to midterms but longer.

• Part I: Multiple-choice and short-answer questions (as in midterms, quizzes, and lecture slides). Use an HB pencil for the bubble sheet.

• Part II: Long questions with multiple parts (similar to problem sets). Use pens for written answers (answers in pencil cannot be appealed).

Exam Policies

• Medical Certificates: Must be submitted in advance, or within 24 hours after the exam for emergencies.

• Unjustified Absence: Results in a score of 0 and an automatic F grade.

• Makeup Exam: Will be scheduled as soon as possible; students should be available on the next possible day.

• Instructor Authority: The instructor has final authority over all exam arrangements.

Academic Integrity

• No Cheating: The university enforces strict academic integrity policies. Any cheating results in an F for the course and is reported to the university without exceptions.

• Honor Code: Refer to the HKUST Academic Integrity and Honor Code.

• Reporting Suspicion: Any suspicion during the exam should be reported to the instructor or TA immediately.

Final Exam Preparation

• Understand the Materials: Review lecture notes, textbook, and past lecture recordings.

• Problem Solving: Practice with questions from quizzes, lecture slides, and problem sets.

• Self-Test: Attempt sample exam questions posted on CANVAS under timed conditions, without referring to notes or solutions.

• Additional Practice: Work on textbook end-of-chapter questions and discuss solutions with the TA if needed.

Final Exam Detailed Coverage

• 1. Introduction: Chapters 1 and 2

• 2. Short-run IS-LM: Chapters 3–5 (excluding sections 4-3 and 4-4, but all lecture slide content is required)

• 3. Medium-run AS-AD: Chapters 6 and 7 (6th edition)

• 4. Open Economy IS-LM-UIP: Chapters 18–20 (excluding the J-curve)

Note: There is more emphasis on topics 3 (Medium-run AS-AD) and 4 (Open Economy IS-LM-UIP).

Course Roadmap

The following topics are central to the course and are interconnected as shown in the roadmap:

• Goods Market (Chapter 3): Analysis of the market for goods and services.

• Money Market (Chapter 4): Examination of money supply and demand.

• IS-LM Model (Chapter 5): Integration of goods and money markets to determine equilibrium output and interest rates.

• Labor Market (Chapter 6): Study of employment, unemployment, and wage determination.

• AS-AD Model (Chapter 7): Aggregate supply and aggregate demand framework for analyzing the medium run.

• Open Economy (Chapters 18–20): Extension of IS-LM to include international trade and finance, including the IS-LM-UIP model and exchange rate dynamics.

Visual Roadmap (Described)

• Start with the Goods Market (Ch. 3), then move to the Money Market (Ch. 4).

• Combine these in the IS-LM Model (Ch. 5).

• Extend to the Labor Market (Ch. 6) and AS-AD Model (Ch. 7).

• Incorporate Open Economy aspects (Ch. 18–20), including the IS-LM-UIP Model and Open Goods Market.

Key Models and Concepts

IS-LM Model (Closed Economy)

The IS-LM model combines the goods market (IS curve) and the money market (LM curve) to determine equilibrium output and interest rates in the short run.

• IS Curve: Represents equilibrium in the goods market where investment equals savings.

• LM Curve: Represents equilibrium in the money market where money demand equals money supply.

Key Equations:

• IS Curve: $Y = C(Y - T) + I(Y, i) + G$

• LM Curve: $M/P = YL(i)$

AS-AD Model (Medium Run)

The Aggregate Supply-Aggregate Demand (AS-AD) model analyzes the interaction between total supply and total demand in the economy, determining output and price levels in the medium run.

• AD Curve: Derived from the IS-LM model, shows combinations of output and price levels where both goods and money markets are in equilibrium.

• AS Curve: Shows the relationship between the price level and output supplied by firms.

Open Economy IS-LM-UIP Model

This model extends the IS-LM framework to include international capital flows and exchange rates, incorporating the Uncovered Interest Parity (UIP) condition.

• IS Curve (Open Economy): Includes net exports as a function of exchange rates.

• LM Curve: As in the closed economy.

• UIP Condition: Relates domestic and foreign interest rates to expected changes in the exchange rate.

Key Equation (UIP):

• $i = i^* + rac{E^e - E}{E}$

where $i$ is the domestic interest rate, $i^*$ is the foreign interest rate, $E$ is the current exchange rate, and $E^e$ is the expected future exchange rate.

Exam Preparation Tips

• Review all lecture slides and textbook chapters listed in the coverage.

• Practice with sample and past exam questions under timed conditions.

• Focus on understanding the logic and application of the IS-LM, AS-AD, and IS-LM-UIP models.

• Clarify any doubts with your TA or instructor before the exam.

Quote of the Day

Never give up. Today is hard, tomorrow will be worse, but the day after tomorrow will be sunshine. — Jack Ma