Erie Community College
Course Outline
A. Course Title: Money and Banking EC 201
B. Curriculum: Liberal Arts -212 Social Science
C. Catalog Description:
Monetary theory and policy is combined with the study of the functions and operations of
commercial and central banks the approach is analytical descriptive and historical.
Prerequisite: EC 102
F (C,N,S)
D. Duration of Instruction: 15 weeks; 50 minutes, 3 class meetings per week
E: Academic Credit Hours: 3-0-3
F: Suggested Text /Course Materials: Several publishers offer excellent textbooks excellent
money and banking texts that would be appropriate for the course
G: Course Outcomes: On completion of this course students will be able to:
1. Develop an awareness of their economic role as a consumer and an appreciation of the
importance of that role both to themselves and to our economy.
2. Develop attitudes and knowledge and practices which will enable them to become more
effective buyers and sellers in the marketplace
3. Understand the basic economic and financial tools necessary to help them analyze and
interpret various consumer economic problems both for the individual and for society as a whole.
4. Understand and use the tools of personal financial management so that they can have better
control of their economic environment.
H. Program Competencies: Students should be able to:
1. Listen and speak effectively
2. Read critically
3. Write correctly and effectively
4. Apply appropriate mathematical procedures and quantitative methods.
5. Operate a computer
6. Identify and logically analyze problems and issues and propose and evaluate solutions.
7. Form reasoned value judgments
8. Exhibit the research skills necessary for lifelong learning
9. Demonstrate an understanding of the nature of our society and demonstrate the ability to
conduct effective social relationships.
10. Demonstrate an awareness of the interdisciplinary nature of knowledge
I. SUNY General Education Knowledge Areas. Students will demonstrate:
1. Understanding of the methods social scientists use to explore social phenomena including
observation, hypothesis development measurement and data collection experimentation and
evaluation of evidence and employment of mathematical and interpretive analysis.
2. Knowledge of major concepts, models and issues of the economics discipline.
J. ECC Graduate Learning Outcomes. See H. above.
K. Assessment of Student Learning. Course instructors may choose among periodic exams,
papers, research projects, collaborative assignments, personal financial portfolios and oral
presentations.
L. Library Resources. Students are encouraged to use online research engines to explore and
research various issues raised in the course that are of particular interest to them.
M. Topical Outline
1. What Is Money? I
Defines money as a medium of exchange, unit of account, and store of value; discusses the
payments system; and identifies how the Fed measures money using the monetary aggregates.
Less Problem Set 19/Graded Visible
2. What is Money? II
Understanding Interest Rates I
This problem set introduces the concepts of present value and yield to maturity using four debt
instruments, such as bonds and loans. The problem set also distinguishing the current yield from
the rate of return, as well as nominal from real interest rates. Less Problem Set 19/Graded Visible
Understanding Interest Rates II
This problem set introduces the More
This problem set introduces the concepts of present value and yield to maturity using four debt
instruments, such as bonds and loans. The problem set also distinguishes the current yield from
the rate of return, as well as nominal from real interest rates. Less Problem Set 14/Graded Visible
Preparing for the Interest Rates and Investment Experiment
Prepares students for the Interest Rates and Investment experiment. Assign as a graded problem
set with a due date before the beginning of the experiment.
Interest Rates and Investment: Experiment
Play the role of a borrower or lender in an experiment that allows you to negotiate loans in order
to fund investment projects.
Analyzing Interest Rates and Investment
Tests understanding of the basic lessons presented in the analysis reading for the Interest Rates
and Investment experiment.
The Behavior of Interest Rates I
This problem set uses the bond market framework to analyze the behavior of bond prices and
interest rates. It presents the basic demand-and-supply model and applies it to the bond market as
well as re-emphasizes the relationship between price and yield to maturity. Less Problem Set
15/Graded Visible
The Behavior of Interest Rates II
This problem set uses the bond framework to analyze the behavior of bond prices and interest
rates. It presents the basic demand-and-supply model and applies it to the bond market as well as
re-emphasizes the relationship between price and yield to maturity.
Behavior of Interest Rates - Liquidity Preference Framework I
Uses the money market to analyze the behavior of interest rates and compares the importance of
the liquidity and other effects over time. Less Problem Set 11/Graded Visible
Behavior of Interest Rates - Liquidity Preference Framework II
Uses the money market to analyze the behavior of interest rates and compares the importance of
the liquidity and other effects over time.
Deflation and the Zero Bound on Interest Rates
The Risk and Term Structure of Interest Rates I
Covers the concepts of risk structure of interest rates by comparing the markets for different
degrees of risky bonds and theories of the term structure of interest rates (expectations,
segmented markets, and liquidity premium/preferred habitat theories). Less Problem Set
15/Graded Visible
The Risk and Term Structure of Interest Rates II
Covers the Rational Expectations and Efficient Financial Markets I
Demonstrates how to compute stock prices based on dividend-valuation models; applies this
concept in explaining rational expectations and the validity of the efficient markets hypothesis;
concludes with applications considering how investors value stocks in practice.
Rational Expectations and Efficient Financial Markets II
Demonstrates how to compute stock prices based on dividend-valuation models; applies this
concept in explaining rational expectations and the validity of the efficient markets hypothesis;
concludes with applications considering how investors value stocks in practice.
3. Banking and the Management of Financial Institutions I
Familiarizes students with the basic structure of a bank balance sheet and how banks manage
their balance sheets.
Banking and the Management of Financial Institutions II
Familiarizes students with the basic structure of a bank balance sheet and how banks manage
their balance sheets.
4. Banking Industry: Structure and Regulation I
Examines the evolution of the U.S. banking system and uses economic analysis of banking
regulation to understand the sources of bank crises, such as the 1980s U.S. banking crisis.
Banking Industry: Structure and Regulation II
5. Multiple Deposit Creation and the Money Supply Process I
Familiarizes students with deposit creation, develops a simplified version of the central bank
balance sheet, shows how monetary policy tools operate through the banking system, and covers
the simple deposit multiplier. Less Problem Set 17/Graded Visible
Multiple Deposit Creation and the Money Supply Process II
6. Monetary Policy: Tools, Goals, and Targets I
Uses a new reserves market framework in which the discount rate is set above the Fed's federal
funds rate target. As this paradigm is relatively new, it may not be used in many textbooks. This
model is used to illustrate how policy tools affect interest rates and examines how to choose
targets to achieve policy goals. Asks specific questions about the history of the Fed, such as
which policy tool the Fed used for the first time in the mid 1930s
Monetary Policy: Tools, Goals, and Targets II
Uses a new reserves market
7. The Foreign Exchange Market I
Discusses exchange rate movements in the long run, according to the concepts of the law of one
price and purchasing power parity (PPP). Develops foreign exchange rate market framework
focusing on the importance of domestic versus foreign financial capital, and uses this model to
explain short-run exchange rate fluctuations. Less Problem Set 19/Graded Visible
The Foreign Exchange Market II
Discusses exchange rate movements in the long run, according to the concepts of the law of one
price and purchasing power parity (PPP). Develops foreign exchange rate market framework
focusing on the importance of domestic versus foreign financial capital, and uses this model to
explain short-run exchange rate fluctuations. Less Problem Set 16/Graded Visible
8. Inflation Targets
9. Aggregate Demand and Supply Analysis I
Introduces the monetarist and Keynesian views of the aggregate demand curve, the short-run and
long-run aggregate supply curves, and the AD-AS equilibrium. This set uses the terminology
"natural rate of output" where some sources may use "long-run aggregate supply curve." It also
uses "aggregate supply" where some sources may use "short-run aggregate supply curve."
Aggregate Demand and Supply Analysis II
Introduces the monetarist and Keynesian views of the aggregate demand curve, the short-run and
long-run aggregate supply curves, and the AD-AS equilibrium. This set uses the terminology
"natural rate of output" where some sources may use "long-run aggregate supply curve." It also
uses "aggregate supply" where some sources may use "short-run aggregate supply curve."
10. Money and Inflation
Use the aggregate demand-aggregate supply model to study the short and long term equilibriums.
Covers the monetarist versus Keynesian views, cost-push versus demand-pull inflation, and the
role of fiscal and monetary policy in generating inflation. Less Problem Set 18/Graded Visible
N. Prepared by Cooper Lansing December 2011