The approach of this text is to teach monetary economics using the classical paradigm of rational agents in a market setting. Too often monetary economics has been taught as a collection of facts about existing institutions for students to memorize. By teaching from first principles instead, the...

"Too often monetary economics has been taught as a collection of facts about institutions for students to memorize. By teaching from first principles instead, this advanced undergraduate textbook builds on a simple, clear monetary model and applies this framework consistently to a wide variety...

Paying interest on required reserves is considered in an overlapping generations model in which the return to capital dominates the return to fiat money. As Smith (1991) showed, financing interest on reserves benefits the initial old at the expense of future generations. We show that the...