ABSTRACT
This chapter extends the analysis of Chapters 13 to 16 for the closed economy to the open economy. The pattern of analysis is similar to the presentation of the closed economy analysis. The first part of it is the application of the IS-LM technique. This gives an intuitive understanding of the material, as well as a realization of the variety and complexity of the different scenarios that can occur in the real world. The second part of the analysis is based on the use of compact models of the open economy.
