Gallaway
ECO 305

Study Guide Test #2
 

Here is the updated study guide.  New items are in blue italics. I think Chapter 10 is emphasized more and chapter 11 a little less than some of the other chapters.  Be sure to understand your theories of term structure (Ch 6) and your bank history (Ch 10).

To prepare for this test, students should study their text, notes, and homework.  Students should also be prepared to answer questions regarding the assigned articles.  To help you get started, here is a list of topics with which you should be familiar.

  • Ricardian Equivalence
  • Why Are Interest Rates Positive
  • Ex Post and Ex Ante Real Interest Rates
  • Adaptive Expectations
  • Rational Expectations
  • Unbiased & Average Absolute Error
  • Livingston Survey
  • Michigan Survey
  • Expectations Theories vs. Empirical Evidence
  • Factors that Affect Real Interest Rates
  • The Importance of the Marginal Productivity of Capital on Interest Rates
  • Money & Tax Illusion
  • Term & Risk Structure of Interest Rates
  • Theories of Term Structure
    • And Calculation of Yields
    • And Implied Shape of Yield Curves
    • Pure Expectations Theory
    • Liquidity Premium Theory
    • Segmented Markets Theory
    • Preferred Habitat Theory
    • Shape of Yield Curve, According to Segmented Markets Theory, From Treasury Issuing Long-Term vs. Short-Term Debt
  • Yield Curve and the Business Cycle
  • Actual behavior of Yield Curve
  • Risk Structure of Interest Rates
  • Default
  • Calculating the Risk Premium
  • Risk Premiums and the Business Cycle
  • Bond Ratings
  • Bretton Woods Institutions
  • Appreciation, Depreciation
  • Winners and Losers of Declining Dollar
  • Floating and Fixed Exchange Rates
  • Spot and Forward Markets
  • Reasons for Foreign Exchange Markets
  • Long-run Determinants  of Exchange Rate
  • Factors Causing Appreciation, Depreciation (supply and demand model)
  • Effect of Exchange Rate Changes
  • Purchasing Power Parity, Law of One Price
  • Short-Run Exchange Rate Determinants
  • Interest Parity Model
  • Price Level Effects, Income Distribution Effects, Terms of Trade Effects of Exchange Rate Changes
  • Types of Bank Liabilities
  • Types of Bank Assets
  • Differences in Costs and Returns
  • Discount Loans
  • Reserve Requirements
  • Capital Accounts
  • Solvency
  • Liquidity Management
  • Liability Management
  • Capital Management
  • Types of Risk Faced by Banks
  • Return on Equity, Return on Assets, Equity Multiplier
  • Banks & Savers
  • Banks & Borrowers
  • Expanding Banking Boundaries
  • Law of One Price & Its various applications
  • Federalists and Anti Federalists
  • First Bank of United States
  • Second Bank of United States
  • CAMELS
  • Free Banking Era
  • National Banking Act of 1863
  • Glass-Steagall Act (1933)
  • Regulation Q
  • Gramm-Leach-Bliley Financial Services Modernization Act of 1999
  • Depository Institutions Deregulation and Monetary Control Act of 1980
  • Garn St. Germain Act of 1982
  • Comptroller of the Currency
  • Regulation of National Banks
  • Regulation of State Banks
  • Historic Restrictions on Branch Banking (responses and counter responses)
  • Explanations of Bank Consolidation
  • Financial Innovations Triggered by Banking Regulations
  • Competitive Equality in Banking Act of 1987
  • Moral Hazard
  • Forbearance
  • Disintermediation
  • Competitive Equality in Banking Act of 1987
  • Moral Hazard
  • Principal Agent Problem  and several contributing factors that fueled S&L crisis
  • Failure of Economics Profession in S&L Debacle
  • Interest Rate Risk
  • Radford Article