[ECON 310] - Midterm Exam Guide - Everything you need to know! (14 pages long)

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6 Feb 2017
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ECON 310
MIDTERM EXAM
STUDY GUIDE
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1
ECON 310: MONEY AND BANKING ECONOMICS
Instructor: Professor Chad Hogan
Office: Lorch M109
Cell phone: - cell number (prefers over email)
Office Hours: Beginning next week
Mon: 12:30-2:30
Wed: 12:30-2:00
Thurs:10:00-12:00
Or by appointment
Exam 1 - 20% - Wednesday, February 1st (in class)
Exam 2 - 35% - Wednesday, March 15th (in class)
Exam 3 - Tuesday, April 25th, 8:00am - 10:00am
Assignments 10%
- Focus on what we talk about in class rather than all the info in the book
- You cannot miss any exams
- Basically no curve
TOPIC 1: WHAT IS MONEY?
Money as an institution
- The banking system presents to us an asset, referred to money, on the more macroeconomic
system
- Classical vs modern economics - the question is the relevance of the money
- Classical - consequence is that we conclude that much of the important stuff in
macroeconomics is from the supply side
- Classical models aim to simplify the world - pure exchange economy (we all own
some stuff and they are all produce resource being supplied to the market and we
have preferences)
- Model how people transform the produce resources into the goods and
services being consumed by the merging of markets
- All take the view that all productive resources being sold to the market are
gaining the ability to consume (bartering)
- Bartering environment can exist independently from currency, money,
and monetary prices (real prices - decided on how many goods/services
that can be received)
Money was never going to be relevant
- Throughout most of macroeconomic history
- Over the last 80 years there was a larger dependency on money, but now if you took out the
money the economy would be less efficient (less wants and needs)
- Ultimately this course is to find efficiency advantages
*Money matters - having money in an economy will make that economy more efficient*
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- What is money?
- Where does this money come from?
- Money is usually presented by someone in charge
- Small scale - people provide the money to the economy the same
- Complex, large scale - there is a mix of both (the Fed and the people)
- Middle agencies convert the money from the Fed to money that the
people can use (commercial banks)
- Production, output, interest rates, etc is influenced by a central banking
system
Policy point of view - the Fed/central banking system is put in an important role
- The constraints faced by the banks and how their decisions affects the economy and its efficiency
- The Fed is a policy making institution and we need to understand its effect on the important
macroeconomic roles
Reading:
- Chapter 3 of text - we’ll get to it in a week and a half
- 3 papers available on Canvas
- Radford, “The Economic Organization of POW Camps”
- Bryant, “Island Money”
- Sweeney & Sweeney, “Monetary Theory and the Great Capitol Hill Baby Sitting Co-op
Crisis”
- Each describes a specific economic environment
DEFINITION OF MONEY
Money - anything that is widely acceptable as payment for goods and services and as repayment of debt
- Try to find a way to divorce ourselves from the definition of money used in normal conversation
- Lamborghini - “wow someone has a lot of money” means someone owns a lot of
valuable goods
- Appreciate the distinction between money and:
- Wealth - someone who amasses a plethora of valuable goods
- Having lots of assets is very different from having a lot of money
- Income - someone makes a lot of “money”
- The have a large income
- Money is a particular set or slice of the wealth of all the assets, assets held simply for
making transactions (to spend)
- How big is this slice of the assets?
- A broader notion that just currency
- A positive balance in a PayPal account is money
- The distinction between money and assets: someone could be very wealth, as in have fancy cars,
but they could not be able to buy bread. Their asset holdings constrain them from buying a lot of
goods (spending all your money on stuff and not having much left over)
- Asset conversion - we are all becoming wealthier in knowledge by gaining human
capital, but we cannot increase our consumption this year because it is difficult to use the
human capital gained from listening to professors
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find more resources at oneclass.com
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