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ECON 1BB3 (535)
Lecture

1BB3 Notes chapter 13.docx

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Winter

Description
Lecture # Chapter 13 Macroeconomics 1BB3 Date: 11/12/2012 Interest Rate in a Small Open Economy • Open Economy: Allows goods, services and capital to flow across borders freely. • Small Open Economy(SOE): not large enough to affect world interest rate or world prices • Perfect Capital Mobility: Full access to world financial markets(Canada) Interest Rate Parity: In theory, the real interest rate in Canada should equal real interest in world financial markets w R = R • Interest rate parity is not always perfect for two reasons: o Risk o Tax t
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