CCGL9030:

Financial Crisis
TUTORIAL 6
KEITH LAW

1
To-do List
• REMINDER – Due Date For Assignments
o Deadline (softcopy) - 11:59pm, Nov 6, 2020(Fri)
o Upload as a single MS WORD file on Moodle

• Next week’s Tutorial cancelled (Nov 9-13,2020)

• Tutorial Discussion
o From closed to open economy
o Video Sharing – Credit Crisis Visualized
o Exchange Rate
o Hong Kong in Asian Financial Crisis 1997-98

2
Open Economy IS Curve
1. Higher Y increases saving, so S – I curve shifts to the right.
2. Higher Y reduces NX (by increasing import of foreign
goods)
3. Hence, new equilibrium interest rate must be lower
4. IS Curve in open economy is also downward-sloping

3
Open Economy IS Curve

4
Question: What If The Government
Increased Its Purchase (G) in Short Run?

5
Video Sharing: while enjoying the video…
1. What factors led to the credit crisis according to the
Video?
2. What do you think about the roles played by different
parties during this crisis, for example, the investment
banks, rating agencies and investors?

The Crisis of Credit Visualized!

https://youtu.be/bx_LWm6_6tA