Globalization has raised awareness among millions of people of the forces unleashed when an economy is opened up to trade and world capital markets. No survey of macroeconomic theory would be complete without some coverage of open economy macroeconomics. This is a vast field. In order to get a grasp on it, we will concentrate on the open economy version of the IS-LM model of short-run equilibriuml . This means we must backtrack a bit, by returning to the assumption of fixed wages and prices.