Fall, 2000 (Section 4, Mon and Wed, 11:00-12:15)

Students must have already completed Econ 132 to be enrolled in Econ 185. Differential calculus is used in parts of this course.

Michael K. Salemi, 301 Gardner Hall
Office Hours: MW 3:00-4:00 and by appointment
Phone: 966-5391 (office), 929-9504 (home)
email: Michael_Salemi@unc.edu
web: http://www.unc.edu/~salemi/Econ185

By the end of the course students should be able to:

Use micro, macro, and financial market concepts to address a number of important questions concerning the operation and regulation of financial markets and monetary policy. Students will discuss articles from the literature, solve problem sets and discuss their answers, simulate the creation of a market for insurance contracts, debate changes to the laws governing banks, write short essays, and write a research paper. Topics and questions include:

1. The globalization of financial markets.

2. Whether or not the US household sector makes an adequate saving effort.

3. The costs and benefits of foreign financing of US fiscal deficits.

4. How risk affects the prices of financial assets.

5. What forces cause interest rates to rise and to fall.

6. Why long maturity interest rates have higher annual yields than short maturity rates.

7. Whether or not the stock market is efficient.

8. Whether financial firms should be more tightly or more loosely regulated.

9. The limits to monetary policy in a deregulated financial environment.

October 4 First Term Paper Progress Report is due.

October 18 Midterm Examination

November 1 Second Term Paper Progress Report is due.

November 22 Term Paper is due at beginning of class.

December 15 noon, Final Examination

There are 120 possible points in the course distributed as follows: Midterm 30, Paper 30, Final 40, Exercises and Pop Quizzes 20. (See note about pop quizzes below.) Letter grades are based on total points and not on an average of letter grades for exams and the paper. The final is cumulative. There is a penalty for papers turned in late--one point per calendar day. Electronic submissions of the term paper are not accepted.Papers written in sub-standard English are assessed a substantial penalty and returned to their authors for rewriting.

1. Hubbard, R. G., Money, the Financial System and the Economy, 3^rdEd, Addison Wesley 2000.

2. The Wall Street Journal.

3. A Course Pak of required readings is available from Copytron.

Because class discussion is an important part of this course, very regular attendance is expected of every student. Pop quizzes will be given at the instructor's discretion. Students who are routinely absent from class are in violation of the class contract and are expected to drop the course.