1. 1/18/06

2. Some 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

3. Key terms/topics OMO (open market operations) FOMC (Federal Open Market Committee) Beige Book Policy 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)

4. 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!

5. Key terms/topics (cont’d) Fiscal policy Monetary policy NAIRU Full employment Potential growth rate of economy

6. 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