HONov03 - Economics 201 Witte Thursday November 3 2005 Quiz...

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Economics 201, Witte, Thursday, November 3, 2005 Quiz: Aplia Money & the Banking System II, in section Krugman & Wells p. 297 figures 12-4 and 12-5. Second Exam in one week. Calculator, photo ID. Coverage: TB Keynes, K&W 9 (again), 10, 11, 12, 13. Similar to Midterm 2 from last winter, but we won’t do problem 10. Here are extra pre-exam hours for us. Friday 2:00-4:00 Jeffrey Wood in Andersen 328 Saturday 2:00-4:00 Mark Witte in Andersen 3245 Sunday 2:00-4:00 Mark Witte in Andersen 3245 Sunday 4:00-6:00 Nenad Kos Review Session in Andersen 3245 Monday 10:00-noon Mark Surdutovich in Andersen 328 Monday 7:PM-8:30 Tim Lin in Leverone G40 Monday 8:30 PM-10:PM Mark Witte in Leverone G40 Krugman & Wells chapters 16, 17, 18, and 19. These won’t be coming out in a nice little book but instead you get them by going to www.worthpublishers.com/krugmanwells , then to the “Krugman/Wells Preview Site”, then to the “Sample Chapters” and they’re at the bottom. It totals less than 100 page of printing. Please let me know if you have any trouble with this. Tricky vocabulary term: When the US government’s Department of the Treasury borrows money, it does it by selling bonds, but it has three names for these sorts of bonds, based upon their term. Treasury borrowing for a year or less is known as a “Treasury bill” or “T-bill.” Treasury borrowing for 2-10 are called “Treasury notes”, and Treasury borrowing for longer periods (10-30 years) are called “Treasury bonds.” Why? I have no idea. DD ” and “m TD ” for the ratios for Demand Deposits and Time Deposits respectively. Krugman & Wells also break down Time Deposits in more detail than I do. For the purposes of tests, we’ll treat all deposits beyond checking as Time Deposits. If you’re interested in learning more about “The Yield Curve”, this mysterious correspondence between interest rates and length of time for borrowing that is a powerful predictor of recessions, here’s a nice article by Daniel Gross. http://slate.msn.com/id/2120161/ Nasko Stoyanov was right! The “Fed Funds Rate” the rate that banks lend each other http://money.cnn.com/2005/11/01/news/economy/fed_rates/index.htm Atanas Stoyanov <[email protected]> The US Banking System I. Federal Reserve (Fed) creates monetary base (MB) a. MB = Currency in circulation (outside of banks) + Bank Reserves b. Bank Reserves = Vault Cash + Deposits by banks and the Fed. c. MB comes from two sources i. Fed making “discount loans” to banks, at the “discount rate” of interest ii. Fed buying stuff (generally US bonds) on the open market, called Open Market Operations (OMO). If the Fed wants to reduce the amount of monetary base in the system, it sells stuff it bought in the past to soak up some of the MB. II.
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This note was uploaded on 01/14/2012 for the course ECON 201 taught by Professor Witte during the Spring '08 term at Northwestern.

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HONov03 - Economics 201 Witte Thursday November 3 2005 Quiz...

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