Mark Vaughan
Senior Economic Advisor / Office of Policy Analysis
Federal Reserve Bank of Cleveland
P.O. Box 6387
Cleveland, Ohio   44104-1387

Phone: 216-579-3130
Email: mark.vaughan@clev.frb.org

Here is the distribution of grades for the 402 sections: 402 Grade Distribution.

Here are the keys to both version of the final exams:
Answer Key_Final Exam_Vaughan_402_Spring 2009
Answer Key_Final Exam (Version 2)_Vaughan_402_Spring 2009

In all borderline situations, a necessary condition for getting “bumped” was a final-exam score on the right side of the cut-off.  So, for example, someone on the borderline of a B+ and an A- needed an A- or better on the final exam to get the bump.

Turns out I will be at the Cleveland Fed full-time next year (more info in a subsequent post).  But Luiggi will be around, and he has your final exams.  You can schedule an appointment to discuss.

Have a great summer!

Posted at 1:00 pm EDT

Posted at 7:56 am CST

I have also had some questions about why Fed independence may come under attack (and why should we care if it does).  Well first off, the Fed has become one of the largest (if not the largest) financial institution in the world.  At year-end 2008, total Fed assets were $2.2 trillion.  The largest U.S. bank holding company at that time was JPMorgan Chase ($2.175 trillion).  Since the beginning of the financial crisis, the Fed has pumped more than $1 trillion in liquidity into the System – more than either TARP 1 (originally passed at $700 billion) or the stimulus package ($787 billion).  Here is a related article from THE ECONOMIST: Federal Reserve: The Hedge Fund of Foggy Bottom.

Finally, all this matters because of the combination of (1) record excess reserves in the banking system and (2) record projected budget deficits.  As of March 2009, the monetary base was $1.64 trillion, and M2 was $8.32 billion – implying a M2 multiplier of 5.06.  The average M2 multiplier from January 2000 to September 2008 was 8.54.  So if the multiplier were to “mean revert,” M2 would rise to $14.03 trillion (an increase of 68.7%).  The Fed stated in the most recent FOMC statement (4/29/09):

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

The Fed is obviously confident the supply of excess reserves can be drained from the banking system as demand for those reserves declines, so M2 will not spike.  Foreign demand for U.S. financial assets (like Treasury debt) depends on expectations about the Fed’s likely success.  This particularly matters given the record budget deficits projected by the Congressional Budget Office (which will put pressure on the Fed to monetize the budget deficit to keep interest rates low).

Posted at 4:46 pm Eastern

According to F&S, the most distinctive feature of the postwar (1948-1960) period was a sharply rising trend in velocity.  Correct answer: True

The key says false — clearly a mistake (see page 639).  Indeed, the whole point of the chapter was attempting to explain why the secular trend from 1869 to 1960 (taken as a whole) was a decline averaging 1% per year — yet velocity rose from 1948 to 1960.

I will give everyone who took the quiz credit for the question (irrespective of his answer), so the maximum score is now 9/8 (113%).

Sorry for inconvenience/anguish caused.  HT to Marcus Walton for pointing out the error.

One other item — if you have finished your extra-credit essay, you may send it electronically to Luiggi.  This will earn “brownie points” by reducing the grading crunch at the end.  Electronic copies will not be accepted once the final exam begins.

Posted at 11:15 am Eastern

I apologize for inconvenience caused/stress induced.  Final grades are due 36 hours after the exam. After conferring with my teaching assistants, I have concluded this will not provide enough time to grade an exam containing a substantial essay component with an appropriate degree of accuracy.

Posted at 5:17 pm Eastern

• 60 questions asking you to analyze the impact of “X” (increase in money supply, taxes, deficit, etc.) in one of the various models.
• 20 general questions from Barro 12-16 and SGM (based on on the extra-credit problem set).
• 20 questions over Friedman and Schwartz, chapters 11-13

Posted at 11:58 am Eastern

HT to Kiro Yovkov.

Posted at 9:23 am, Eastern