5-1.The Goods Market and the IS Relation 5-2: Financial Market and the LM Relation 5-3: The iS-LM- Model: Exercise 5-4: Using a Policy Mix 5-5: Adding Dynamics 5-6: Does the IS-LM Model Actually Capture What Happens in the Economy?
• Introduction • The welfare economics of market power • Profit Maximization • Perfect Competition • Efficiency • Market Power • Market Power and Public Policy • Theory of the firm • Neoclassical theory of the firm • Why do firms exists? • Limits to firm size • Do firms profit maximize? • Summary
Types of market efficiency The weak-form of efficiency: price accurately reflect all information that can be derived by examining market trading data such as past prices, trading volume, short interest rate, etc
The Capital Market Public Issue Privileged Subscription Regulation of Security Offerings Private Placement Initial Financing Signaling Effects The Secondary Market
Market Portfolio-Portfolio of all assets in the economy. In practice a broad stock marke index, such as the S&P Composite, is used to represent the market. Beta- Sensitivity of a stock's return to the return on the market portfolio
Introduction The objective of this chapter is to study how employment is determined in the labor market We are considering the labor market in which the following relation should always hold:
Chapter Organization Introduction Exchange Rates and International Transactions The Foreign Exchange Market The Demand for Foreign Currency Assets Equilibrium in the Foreign Exchange Market Interest Rates, Expectations, and Equilibrium Summary
Market power-the ability of a firm to profitably raise prices above marginal cost. Sources of market power: maintenance of market power requires barriers that prohibit or restrict entry of new firms
