Monetary+Policy+and+the+Keynesian+Theory+of+Liquidity+Preference

[|Boundless Learning]: Additional resources specifically developed for the textbook chapters below can be found by clicking the link to the left. **Beware**: You will have to sign up with Boundless Learning and choose Mankiw's textbook first. Then, you will have to search for the right chapter.


 * __April 22__:** Keynesian theory of liquidity preference (Syllabus Section 2.5)


 * __Homework Due__: Read Mankiw Chapter 34 (How Monetary Policy Influences Aggregate Demand section) and watch the following video.
 * media type="youtube" key="BoDjLCKov9I" height="315" width="560"


 * __Assessments and A__ __ ctivities __ : Lecture on the Keynesian theory of liquidity preference (PDF below)
 * [[file:Keynesian Theory of Liquidity Preference.pdf]]


 * __Related Readings__
 * [|Liquidity traps]
 * "Mr. Keynes and the Classics: A Suggested Interpretation" by John Hicks (1937)
 * [|Chairman Bernanke Should Listen to Professor Bernanke]
 * [|Japanese Monetary Policy: A Case of Self-Induced Paralysis by Ben Bernanke]
 * __[|Interest Rates]__
 * [|Investment]
 * [|Money Supply]
 * [|Capital Markets]


 * __April 24__:** Monetary policy tools (Syllabus Section 2.5)


 * __Homework Due__: Watch the following video.
 * media type="youtube" key="rcPEkmstDek" height="315" width="560"


 * __Assessments and Activities__: Free response/problem and lecture


 * __//Free Response/Problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * 1) Define theory of liquidity preference.
 * 2) Explain how the supply of money is determined.
 * 3) Explain why the money demand curve slopes down.


 * __//Lecture//__: Monetary policy tools (PDF below)
 * [[file:Monetary Policy Tools.pdf]]


 * __Related Readings__
 * [|Chairman Bernanke Should Listen to Professor Bernanke]
 * [|Japanese Monetary Policy: A Case of Self-Induced Paralysis by Ben Bernanke]
 * [|Monetary Policy by James Tobin]
 * __[|Interest Rates]__
 * [|Money Supply]
 * [|Bonds]
 * [|Junk Bonds]
 * [|Capital Markets]


 * __April 26__:** Keynesian monetary policy (Syllabus Section 2.5)


 * __Homework Due__:
 * __McGee__: Pages 317-322
 * __ Mankiw __ : Chapter 36 (Should Monetary Policy Be Made By Rule Rather Than By Discretion section)


 * __Assessments and Activities__: Free-response/problem and lecture


 * //__Free-response/problem__//: You will work cooperatively with your partner to construct a response to the following prompt.


 * __ Suppose the reserve requirement for checking deposits is 10 percent and that banks do not hold any excess reserves __.
 * 1) If the Fed sells $1 million of government bonds, what is the effect on the economy's reserves and money supply?
 * 2) Now suppose the Fed lowers the reserve requirement to 5 percent, but banks choose to hold another 5 percent of deposits as excess reserves. Why might banks do so?What is the overall change in the money multiplier and the money supply as a result of these actions?


 * __//Lecture//__: Keynesian monetary policy (PDF below)
 * [[file:Keynesian Monetary Policy.pdf]]


 * __Related Readings__
 * [|Monetary Policy by James Tobin]
 * __[|Interest Rates]__
 * [|Investment]
 * [|Money Supply]
 * [|Bonds]
 * [|Bubbles]
 * [|Chairman Bernanke Should Listen to Professor Bernanke]
 * [|Japanese Monetary Policy: A Case of Self-Induced Paralysis by Ben Bernanke]
 * [|Capital Markets]
 * [|Futures and Options Markets]
 * [|Savings and Loan Crisis]


 * __April 30__:** Monetarism and the money rule (Syllabus Section 2.5)


 * __Homework Due__: Read McGee (pages 291-304)


 * __Assessments and Activities__: Free-response/problem and lecture


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * 1) Define the following terms: monetary expansion, liquidity trap and recession.
 * 2) Explain how the Fed would use one monetary policy tool to remedy a recession, using appropriate diagrams to expain the effect of the policy.


 * __//Lecture//__: Monetarism and the money rule (PDF below)
 * [[file:Monetary Policy Disputes and the Money Rule.pdf]]


 * __Related Readings__
 * __[|Larry Summers and John Taylor Debate (Rules vs. Discretion), April 4, 2012]__
 * __[|Interest Rates]__
 * [|Money Supply]


 * __May 2__:** Inflation targets vs. interest rate targets (review)


 * __Homework Due__:
 * __ Mankiw __ : Chapter 36 (Should The Central Bank Aim For Zero Inflation section)
 * Be prepared for partner quiz.


 * __Assessments and Activities__: Free-response/problem and lecture


 * __//Free-response/problem//__: You will work cooperatively with your partner to construct a response to the following prompt.
 * Should monetary policy be made by rule rather than by discretion?


 * __//Lecture//__: Inflation targets vs. interest rate targets


 * __Related Readings__
 * [[file:Problems with CPI and Fed Targeting.pdf]]
 * [|Monetary Policy, Made to Measure]
 * [|A Monetary Policy Which Will Correlate Rates and Objectives Remains a Pipe Dream]
 * [|Monetary policy in liquidity traps]
 * [|Chairman Bernanke Should Listen to Professor Bernanke]
 * [|Japanese Monetary Policy: A Case of Self-Induced Paralysis by Ben Bernanke]
 * __[|Interest Rates]__
 * [|Bubbles]


 * __May 6__:** Test on m onetary policy and the Keynesian theory of liquidity preference

[|Click here for a link to a good concise review that compares and contrasts Keynesians and Monetarists]