Department of Economics
Penn State University
Course Syllabus
Spring 2007
Economics 351
Money and Banking
Section 001
026 Hosler Building
MWF 2:30 – 3:20 pm
Instructor: Dr. Russell P. Chuderewicz
Office: 506 Kern Graduate Building
Phone: 863-2156
Email: rxc122@psu.edu
Home Page http://grizzly.la.psu.edu/~rxc122/
Username: ecochud
Password: wildflower
(note: user name and password are case sensitive)
Office Hours: Wednesdays
noon – 2 pm, Thursdays, 11 am - 1 pm and by
appointment.
Required Material
Textbook: The Economics of Money, Banking, and Financial Markets, by Frederic S. Mishkin,
Seventh Edition, 2004, Addison Wesley. BE SURE TO PURCHASE THE CHUDEREWICZ
EDITION (that includes the customized material required for the course).
Stock-Trak Portfolio Game – We will be playing the markets with lots of money! We will
begin the semester with $100,000 each. After we review a sufficient amount of financial market
material, we will add $400,000 to the fun. The cost is roughly $10 and more details will be
discussed in class. The game itself is worth 10 percent of your grade. To get a perfect score,
you need to make sure complete each of the following (I expect most everyone to get a perfect
score here!):
 Make 20 or more trades during the trading period (currently 1/22 – 4/27). Trades must be
made during January, February, March and April (no cramming for this assignment)
otherwise 10 points will be taken off for each month missed.
 Within the 20 trades, you MUST: Trade stocks by taking a 1) long and a 2) short
position, purchase 3) call options, 4) put options, 5) go long on interest rate futures, 6) go
short on interest rate futures, 7) bet on a currency of your choice, and 8) purchase futures
options(calls or puts, your choice).
 Finally, you must type up a one to two page summary of all the 8 specific trades
contained in the bullet above explaining why you did what you did and how you could
(expected) make money. That is, give specific scenarios consistent with you making
some cash. On the back of your assignment, attach the specific information on each of the
1
trades you refer to including the dates and quantity of each trade. This project is DUE
4/27 before class. No late papers accepted.
2
Incentive Structure of the Stock-Trak Portfolio Game – In addition to the above
requirements, I have added a way for you to add three percentage points to your final average.
Here is how it works. During the first (or second) class, we will throw darts at the WSJ stock
pages that will determine the initial “DART PORTFOLIO.” Subsequently, when we add the
$400,000, we will throw more darts and add to the dart portfolio. If you beat the dart portfolio
(game ends 12/08), then you get the ONE extra percentage point added to your final average!
Another way to add an extra percentage point to finish in the top 10% of the class. And the final
way to add a percentage point to your final average is to “Beat the Market,” that is, obtain a
higher rate of return than the S&P 500 during the trading period.
Suggested Reading (highly recommended)
“Wall Street Journal Guide to Understanding Money and Investing”
Simply search for this title on the internet using any search engine –
very very reasonable (around $5) and a book that you will want to
keep if you are the least bit interested in financial markets.
The Wall Street Journal, Discount student subscriptions will be available during the first week
of class. With a subscription you will have free access to the Wall Street Journal Interactive
Edition on the Internet.
Welcome to ECON 351, Money and Banking!
The following tips will help you succeed in this class as well as make the class more enjoyable
and useful for all concerned.
MOST IMPORTANT: Attend class! I basically test you on what I teach in the classroom. With
this in mind, you should think of the textbook as a compliment to the lectures (rather than a
substitute). Specifically, a substantial amount of the material that you are tested is not in the text
(i.e., current events, extensions of book material, etc.). By attending class daily, you will have a
good feel for what I think is important and what I don't.
Participate in Class. Nothing is worse than an economics course without dialogue. For my part,
I will continuously ask questions during class. I encourage you to ask questions and/or share
personal economic experiences with the class. Over the years I have learned a great deal from
students such as yourself!
Keep up on current events and statistics. One important facet of the course will be discussion
and applications of current events virtually every class period. Typically, questions regarding
current events account for a significant portion of each exam.
3
Tips to succeed in Econ 351 (continued)
Frequently check the home page. I take advantage of today's technology and use it extensively
in conducting this course. I will use the home page to provide you with lecture notes, practice
tests, study notes, homework assignments, summaries, articles on current events, etc. Keep in
mind that you will be tested on articles that I post on the home page. If you have any trouble or
questions in these matters, please see me or send me an Email.
Keep in touch throughout the semester. I basically have an open door policy and would love
to chat with you. Many students have lots of trouble with Economics in general and in particular;
this course. Remember, I am here to serve you.
RULES/REGULATIONS – Don’t leave early – if you must, let me know before class. BE
POLITE to me and your classmates – no talking during class. TURN OFF ALL CELL
PHONES BEFORE CLASS.
Academic Integrity: Dishonesty of any kind is not tolerated in this course. Dishonesty includes,
but is not limited to, cheating, plagiarizing, fabricating information or citations, facilitating acts
of academic dishonesty by others, having unauthorized possession of examinations, submitting
work of another person or work previously used without informing the instructor, or tampering
with academic work of other students. Students who are found dishonest will receive the most
severe academic sanction consistent with PSU polices. A minimum penalty for any breach of
academic integrity is the grade of “F” for the course. For more on academic integrity, click on
or type in the following URL address:
http://econ.la.psu.edu/Undergraduate_Program/undergrad_page.htm#aca_int
Disability Access Policy: The Pennsylvania State University encourages qualified persons with
disabilities to participate in its programs and activities and is committed to the policy that all
people shall have equal access to programs, facilities, and admissions without regard to personal
characteristics not related to ability, performance, or qualifications as determined by University
policy or by state or federal authorities. If you anticipate needing any type of accommodation in
this course or have questions about physical access, please tell the instructor as soon as possible.
You are required to take all the exams. There are no makeup exams. If one of the midterm
exams is missed due to a University Approved Excuse, the weight for that exam will be shifted
to the subsequent exam. If you do not have a valid excuse, you will receive a zero for that exam.
No exceptions will be made. Job interviews and travel plans (except as required by universitysponsored activities) DO NOT constitute valid excuses for missing an exam. Students should
plan to be in town until they take the final exam. For more information on valid excuses, please
see the Department of Economics policy on valid excuses, which is available at the department
web site at: http://www.econ.psu.edu/Undergraduate_Program/undergrad_page.htm#valid
If you have a documented medical emergency and hence are unable to take an exam or a quiz
please e-mail me in advance, if possible.
4
Tentative Course Outline (Subject to Change)
Rather than attempting to tie myself (and you) to a rigid course outline as I have attempted quite
unsuccessfully in the past, the course will be broken up into four distinct areas that are naturally
interconnected. We will focus much of our attention on the customized material that was packaged with your
textbook. Given that we are playing the stock trak portfolio game, we will emphasize financial markets
during the beginning of the semester (Chapter 2 of customized material) so that we have the tools to make a
wide variety of ‘bets’ in the financial markets (sooner rather than later).
First third of class (roughly): Introduction, The cruise ship example with lots of lots and lots of economic jargon
(terms). Getting familiar with the US economy, the speed limit(s) of the economy, the goals of policy makers,
monetary vs. fiscal policy and the associated lags, the boiler example, intermediate targets, the new economy and
aggregate supply, aggregate demand, how macroeconomic policy is supposed to work, formal modeling of the US
economy using aggregate demand and supply analysis, real world examples: the great depression, overheating, the
new economy, stagflation., the misery index, the fed’s loss function and hawks vs. doves, the Taylor rule, real vs
nominal interest rates and the Fisher effect. Financial Markets (Chapter 2) we learn all about financial markets
(primarily stocks, bonds, and foreign exchange). There are many different financial instruments and ways to “play
the market.” It is during this section of the course where we add the $400,000 to the Stock-Trak portfolio game.
We will also undoubtedly relate movements in the market to current events so expect a significant amount of (home
page) postings in this regard.
EXAM 1: TWO DATES:
Essay/Problem portion of exam 1: Feb. 28, in class
True/False/Multiple Choice portion: March 2, in class
Second third of class (roughly): The Fed, monetary policy, monetary theory, and the bond market. (Chapter 3 of
customized material, chapters 4, 5, 6, 12, 13, 14, 15, 16) This section focuses primarily on material from the
textbook..
EXAM 2: TWO DATES:
Essay/Problem portion of exam 1: April 11, in class
True/False/Multiple Choice portion: April 13, in class
Third and Final Section of class (roughly): The East Asian financial crisis, the Russian financial crisis (again, lots
of terms). Most of this material is included in Chapter 4 of the customized portion of the textbook package.
NOTE – Stock Trak Assignment due April 27
FINAL EXAM WILL BE ADMINISTERD DURING FINAL EXAM WEEK AND WILL BE
COMPREHENSIVE
Grading Policy: I basically follow a traditional grading scale (see below). “Plusses” and “minuses” will be
determined according to the distribution of the grades at the end of the semester. There are three exams, the first
and second worth 20% of your grade and the final exam worth 30%. Another 20% of your grade is accounted for by
quizzes and/or homework assignments throughout the semester. NOTE THAT QUIZZES MAY BE ANNOUNCED
OR UNANNOUNCED and homework may or may not be collected. The remaining 10% of your grade is accounted
for by the Stock-Trak portfolio game that was previously explained. Note that there are no make-ups for the quizzes
and late homework assignments will not be accepted. Best of luck to all!
Grading Scale: 90% + = A or A - ; 80 - 89% = B-, B or B+; 70 - 79% = C or C+; 60 - 69% = D
5