Download Economics 307: Intermediate Macroeconomics

Economics 311: Money and Banking
Winter Quarter, 2014
Professor: Dr. John M. Krieg
Office: Parks Hall #307
Telephone: 650-7405
Webpage: http://faculty.wwu.edu/kriegj/
Office Hours: T H 2 - 4 or by appointment
E-Mail: [email protected]
Course Objectives: This class is based around a number of “puzzles” observed in the current
American financial system:
1. Stocks are a tiny fraction of corporate finance.
2. The largest source of corporate finance is indirect finance (banks).
3. The banking system is one of the most heavily regulated sector in the economy.
4. Only large, well-established corporations can finance through the security market.
5. Collateral is a widely used condition for receiving a loan.
6. Debt contracts are extremely complicated legal documents.
Many of these puzzles are explained only through failures in the standard microeconomic model of
supply and demand. Thus, this class will focus partly on market theory and breakdowns in the theory
learned in Economics 206. Yet, this class does not solely focus on microeconomic issues. The
purpose of financial systems is to transfer financial capital from those with excess to those desiring
capital. The easier this transfer, the higher economic investment which subsequently fuels economic
growth. Thus, this class will provide an overview of the American financial system and focus
extensively on the price of borrowing and lending financial capital. By the end of this course, you will
have an understanding of interest rates and their impact on the macroeconomy. To do this, we will
spend time investigating how interest rates are determined, commercial bank functions and regulation,
and the role of the Federal Reserve system.
Resources: The required textbook for this class is Frederic Mishkin’s Economics of Money, Banking,
and Financial Markets. The publishers of Mishkin’s textbook maintain a website that, with the
purchase of the textbook, students can access. I maintain a website that includes sample exams,
practice problems with answers, and class announcements.
Course Outline: Ideally, this course is most easily broken down in five sections: an introduction to
the financial system (chapters 1 through 3), the determination of interest rates (chapters 4-8), financial
institutions (chapters 11-14), monetary policy (chapters 15-18), and macroeconomic theory (chapters
20-23). In addition, there are a handful of chapters that you will find interesting which we will spend
some time discussing. These are the two foreign exchange rate chapters (10 and 19). In all, there are
20 chapters that I hope to cover in a 10 week course.
Comments: Your success in the class will depend upon a number of factors: your ability to read and
understand material, your ability to assimilate lecture material and text material not covered in class,
and your ability to apply economic concepts to the world around you. Obvious means of enhancing
your performance include reading the chapters ahead of class, attending class, and being active in
classroom discussions. Perhaps the most important tool you will employ in this class is that of math; a
solid mathematical background will allow a greater understanding of the models studied in this class. I
will assume that each student has a working knowledge of algebra and geometry. Further, some
background in calculus will aid in the student in understanding macroeconomic models covered at the
end of class. Should you be uncomfortable with these expectations, do not hesitate to see me.
It is important to note that this course is designed as an introduction to financial markets. It is not
designed as a course for finance majors.
Grading: There will be 2 midterms, homework, and a final. The first midterm will be given after
chapter 8 is covered (about the 4th week of class). The second midterm will occur after chapter 14
(about the 7th week of class). The final is scheduled for the regularly scheduled university time. The
two midterms will not be purposefully comprehensive although they may employ material that builds
upon early course work. The final exam will be comprehensive. Absolutely no make-ups will be
allowed without prior approval or a medical doctor’s excuse is presented.
Classroom discussion of topics and current economic events is highly encouraged. Although not
directly computed in your grade, students who positively participate in class may have their final grade
improved above what the numerical calculation would suggest.
Grade weights are as follows:
Midterms (2)
Final Exam
60%
40%
Disability Services: Students with learning disabilities are encouraged to contact Student Support
Services at 650-3844 if they desire testing accommodations for this class.
Classroom Dishonesty: Cheating on American campuses has become a common event. Surveys
indicate that more than 80% of college graduates have cheated at least once during their tenure in
higher education. Cheating is not a victimless crime. Grades earned through illegitimate means
reduce the value of grades earned by honest students. Therefore, students caught cheating will
immediately be failed from my course. For more information regarding Western Washington
University’s Academic dishonesty policy, please review the current Academic catalog, Appendix D.
Note on Travel: I have been invited to present a paper at the meetings of the American Education
Finance Policy meetings during March 13-15. As a result, we will not hold class or office hours the
Wednesday, Thursday, or Friday of that week.