Economics 32025: Money, Credit, and Banking
Fall 2011Professor: Lucas M. Engelhardt
Class Time: TR 2:00-3:15PM E-mail:
Main Hall 215Office: Main Hall 310E
Office Phone: 330-244-3307
(ext. 53307)
Office Hours: M 2-5PM
TR 11AM-2PM
W 9:30AM-12:30PM
Course Objectives
According to the course catalog this course is about the “Organization of our money, credit and banking system; principles and problems of monetary policy.” After this course, you should understand how the financial system works (or is supposed to work!).
Required Texts
Frederic Mishkin, “The Economics of Money, Banking, & Financial Markets”, Business
School Edition (2nd edition), with MyEconLab
MyEconLab is not required, but is included with the version of the text available at the bookstore.
Murray N. Rothbard, “Man, Economy, and State with Power and Market”, available for free online (in HTML, PDF, or EPUB) at: (also available in the store at mises.org)
Vista Assignments - there are one or two reading assignments posted on Vista. These will require an ePub reader to read. I recommend as it is free and easy to use.
Optional Texts
Ludwig von Mises, “The Theory of Money and Credit” available online for free here:
Jesus Huerta de Soto, “Money, Bank Credit, and Business Cycles” available online for free here:
You can subscribe to the Wall Street Journal at a discounted rate. The Journal is a good way to keep up on current events in financial markets.
Grading
Projects30%
Homework20%
Participation15%
Final35%
Projects
This is an upper-level course. As such, I expect you to attain a deeper level of understanding than you would in an introductory level class. A higher level of understanding is hard to demonstrate on a multiple choice or short-answer style test. So, a handful of projects have been designed to evaluate your ability to use what we’ve learned in class in real-world situations. Instructions and submission of these projects will be on Vista.
Homework
There will be weekly homework assignments due every Friday on Vista (under “Assessments”). These homeworks may be attempted multiple times, and the high score at the due date will be kept.
Participation
Your participation in class helps class be significantly less dull, and helps guide the class discussion toward your interests. Your score in participation is based on your completion of a “Minute Paper” each class. You must be in class to receive credit for the minute paper. Your score from minute papers may be adjusted based on asking insightful questions or giving insightful answers. Your minimum participation score will be calculated as: (Minute Papers Written + 2) / Total Minute Papers, up to 100%. So, you can miss two unexcused minute papers without it impacting your participation score.
Final
The Final will be a set of essay questions drawn from throughout the semester. Prior to the final, I will provide you with a list of approximately fifteen possible questions. Of these, five will appear, verbatim, on the final. Of these five, you will select three to answer. So, technically, you can skip two questions in your preparation and still be “safe”. However, it is best to have a reasonable answer prepared for every question, as no one has a perfect memory!
Letter Grades
Letter grades are based on the percentage of possible points you have earned. The scores will work something like this:
90-100A
80-89B
70-79C
60-69D
Below 60F
If a grade is “borderline”, I might assign a “+” or a “-” – but these are not typically expected.
It seems that some students misunderstand the nature and purpose of grading. So, let me make a few points. First, the purpose of a grade is to accurately reflect the student’s mastery of the course material. Therefore, external effects are irrelevant. For example, pleas along the lines of “I need such-and-such a grade to play this-or-that-sport (or be-in-this-or-that-play, or keep my scholarship or finish my major)” are entirely irrelevant. Think of it this way: Does the fact that you play a particular sport/have a role in a play/have a scholarship in any way suggest that the points you earned systematically understate your understanding of the course material? I have yet to hear a good argument for a “yes” answer to that question.
Second, professors are in a somewhat precarious position, as we have responsibilities to two parties. One responsibility is to our students. The other is to the university. Our primary responsibility to our students is to ensure that you learn as much as you can. To this end, I encourage you to interrupt my lectures with relevant questions or comments. Also, if you think of questions feel free to come to my office hours or e-mail me. I will happily do my best to answer them. However, when it comes to grades, our primary responsibility is to the university. If we misreport grades (for example, by giving all A’s), we do the university a disservice by destroying the signal that grades provide. This damages the reputation of the university – and ultimately the education and prospects of the university’s current and future graduates.
One last point: a “C” is “average” – and so should not be a surprise to anyone who receives one, as it is obviously the case that not every student can be “above average”.
Class Policies
1. Attendance is strongly recommended. Participation scores are based on a combination of attendance and meaningful participation in class. Failure to attend will result in a poor participation score. Also, attendance is closely correlated with scores on the midterms and final. Poor attendance and poor performance go hand-in-hand. Make-up work will be given for documented, excused absences.
2. Food and drink are allowed, if food/drink related noise is kept to a minimum. (In other words, no noisy bags/wrappers.)
3. Cell phones: cell phones should be off or silenced, and should not be used for text messaging during class. If your cell should ring during class, I will likely ask who it is, and perhaps make a joke about it.
4. Sleeping: Please avoid sleeping in class. If you do fall asleep, I will make a point of not waking you.
5. Academic Honesty: The use of the intellectual property of others without attributing it to them is considered a serious academic offense. Cheating or plagiarism will result in receiving a failing grade for the work or course. Repeat offenses will result in dismissal from the university.
6. Students with Disabilities: Kent State University recognizes its responsibility for creating an institutional atmosphere in which students with disabilities can succeed. In accordance with University Policy Subpart E…104.44, if you have a documented disability, you may request accommodations to obtain equal access in this class. Please contact the disability coordinator on campus, Amanda Weyant in Student Accessibility Services, located in the Student Success Center, lower level of the Campus Center, phone (330) 244-5047, or . After your eligibility for accommodations is determined, you will be given a letter which, when presented to instructors, will help us know best how to assist you.
Students with disabilities should inform the instructor as soon as possible of their needs, so that reasonable accommodations can be made.
7. Classes Canceled – Campus Closings: Announcements of class cancellations and/or campus closings will be made on the campus home page. In the case of an emergency, weather-related or otherwise, please check the web page at stark.kent.edu for information on the buildings and times of the closing. While information may be broadcast by radio and television, this should be confirmed by the web page, which is the official announcement of the campus and which will be the information used to determine issues related to student attendance, rescheduling of tests, and other concerns.
8. Course Withdrawal: If you are considering withdrawing from this course, please consult with a staff member in the Student Services Office, 134 Main Hall. Withdrawal from a course can affect financial aid, student status, or progress within your major. For withdrawal deadlines, please refer to
Important Dates:
September 13 - Stock Market Project Setup - Meet in East Wing Computer Lab
September 16 - Stock Analysis Project Due
October 7 - Banking Management Project Due
November 29 - Stock Market Contest Ends
November 30 - FOMC Project Due
December 6 - Stock Market Project Due
December 7 - Exchange Rate Project Due
Tentative Schedule
Introduction
August 30 - Introductions (Chapter 1)
Stock Market Stuff (Note: this is out of [logical] order, but intentionally so)
September 1 - Stock Market Pricing Models (Chapter 7)
September 6 - The Efficient Market Hypothesis and Behavioral Finance (Chapter 7)
September 8 - Basic Stock Analysis Approaches (Reading)
September 13 - Stock Market Project Setup
Money and Inflation
September 15 - What is Money? & How We Got Here (Chapter 3)
September 20 - Three Theories of Money and Inflation (Chapter 25 & Readings - The Quantity Theory of Money and The Austrian Theory of Money)
Banking
September 22 - Banks and the Money Supply Process (Chapter 17)
September 27 - Banking as a Business (Chapter 10)
Interest Rates and Financial Markets
September 29 - Understanding Interest Rates (Chapter 4)
October 4 - Time Preference Theory of Interest (Reading - Man Economy and State, Chapter 6, Sections 1-4)
October 6 - Theories of Asset Demand & Loanable Funds (Chapter 5)
October 11 - Liquidity Preference Theory (Chapter 5)
October 13 - Risk & Term Structure of Interest Rates (Chapter 6)
October 18 - Financial Derivatives (Chapter 14)
Financial Crises & Business Cycles
October 20 - Business Cycles in AS-AD (Chapter 23)
October 25 - Austrian Business Cycle Theory (Reading - Man, Economy, and State, Chapter 12, Section 11)
October 27 - Financial/Banking Crises and Business Cycles (Chapter 9)
Financial Regulation & Central Banking
November 1 - Economic Analysis of Financial Regulation (Chapter 11)
November 3 - Central Banks & The Federal Reserve System (Chapter 16)
Monetary Policy
November 8 - The Tools of Monetary Policy (Chapter 18)
November 10 - The Conduct of Monetary Policy: Strategy (Chapter 19)
November 15 - The Conduct of Monetary Policy: Tactics (Chapter 19)
International Finance & Exchange Rates
November 17 - The Foreign Exchange Market (Chapter 20)
November 22 - The Foreign Exchange Market - Part II
November 24 - THANKSGIVING NO CLASS
November 29 - The International Financial System
December 1 - FOMC Meeting Day
December 6 - Current Events Discussion
December 8 - Final Review
FINAL - Tuesday, December 13, 1PM
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