1/18/061/18/06

Some announcementsSome announcements

HW #1 posted – due Weds, 1/25 – also, we will have a quiz on 1/25 as well!

Practice HW posted, we will do today! Some lecture notes posted – on the money market,

money multiplier, and the great depression (we did this last class).

Stock – trak, let’s make some bets! We will go long and short on stocks (equities).

Finish up some terms, hopefully

Key terms/topicsKey terms/topics

OMO (open market operations)FOMC (Federal Open Market Committee)Beige BookPolicy Lags and forward looking behavior

(two analogies – cruise ship ; driving a car)Review of current state of affairs regarding

actual fed behavior and the signals they are sending (Go Open Market Page)

Key terms/topics (cont’d)Key terms/topics (cont’d)

Board of Governors The 12 Regional banks Reserve Market (A Y2K example) Reserves: Two types: 1) excess and required Reserve Requirement Ratio The Money Supply The Federal Funds Rate The Discount Rate Interest rates: Short Term vs Long Term: Real vs Nominal How monetary policy works!

Key terms/topics (cont’d)Key terms/topics (cont’d)

Fiscal policyMonetary policyNAIRUFull employmentPotential growth rate of economy

Key terms/topics (cont’d)Key terms/topics (cont’d)

The Fed’s loss function Exogenous shocks Hawks vs doves Overheating The new economy The Importance of Productivity Speed limit of the economy Traditional model