Econ 310 Winter 2011 Syllabus

Econ 310 Winter 2011 Syllabus - Economics 310 Money and...

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Syllabus University of Michigan Winter 2011 Economics 310 Money and Banking
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Econ 310 Winter 2011 Course Outline The institution we label money is ubiquitous in modern economies, yet existence of the institution is by no means a pre-condition for trade to take place. It is clearly possible for barter to represent a significant portion of the trade occurring in an economy; however bartering imposes many impediments to attaining efficient levels of trade. Unless agents hold inventories of a very wide range of commodities, potential trading pairs are seldom likely to observe the double coincidence of wants that will enable trade to take place. High volumes of trade will be attained, then, only if agents bear both the risks and storage costs of maintaining inventories of goods they do not desire. This provides us with an understanding of the role of money in the modern economy: by relieving agents of the need to satisfy this double coincidence of wants, money enables more trades to take place, and resources to be allocated more efficiently. During the course, we interpret money as an asset that improves the efficiency of exchange. We examine why and how this medium-of- exchange is typically controlled by an economy’s central bank, and strive to understand the role of the central bank in the modern macro- economy. Students will develop a strong intuitive understanding of the relationships that shape money and credit markets, and how these markets influence macroeconomic outcomes. We discuss the term structure of interest rates, both to appreciate how markets for liquidity and for financial assets are interrelated, and to appreciate how the
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Econ 310 Winter 2011 Syllabus - Economics 310 Money and...

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