PSC 129 Chapter 13 Olfaction

I. Olfactory Physiology
1. Odors and Odorants
- Odors are chemical compounds; must be volatile, small, and hydrophobic
2. The human olfactory apparatus
- The primary function of nose is to filer, warm and humidify the air that we breathe
- Air pass through a narrow space called olfactory cleft and settle on a yellowish patch of mucous membrane called the olfactory epithelium
- Epithelium contains three types of cells: supporting cells, basal cells, and olfactory sensory neurons
a. OSN are small neurons that have cilia protruding into the mucus covering the olfactory epithelium
b. The cilia have olfactory receptors on their tips.
c. The interaction between an odorant and OR stimulates a cascade events that will produce an action potential that is transmitted along the axon of the OSN to the olfactory bulb.
d. In order to fire action potential, 7 or 8 odor molecules must bind to receptor, and takes 40 of these nerve impulses for a smell sensation to be reported.
e. The axons on the ends of OSN opposite the cilia pass through the tiny holes of the cribriform plate
f. Anosmia: smell blindness
g. Stem cells in the olfactory epithelium can form new OSN
h. The OSN axons pass through the cribriform plate and bundle together to form the olfactory nerve (CN I) and enter a blueberry-sized extension of the brain just above the nose, called the olfactory bulb.
i. Olfactory is ipsilateral: the right olfactory bulb gets information from the right nostril and the left olfactory bulb gets information from the left nostril.
j. Inside the olfactory bulb are glomeruli where OSN axons synapse with dendrites of two other types of neurons: mitral cells and tufted cells.
k. Each glomerulus may receive axons from different receptor types.
-Brain structures: olfactory bulb, olfactory cortex, amygdala-hippocampal complex, and entorhinal cortex --> network called limbic system which is involved in emotion and memory

PSC 129 Chapter 12 Touch

- Touch is the mechanical displacements of the skin; kinesthesis: internal sensations that inform us of the psoitions and movements of our limbs

-Somatosensation: sensory signals from the body

-Proprioception: perception by kinesthetic and vestibular receptors.

I. Touch Physiology

1. The sense organ and receptors for touch

-Touch is in skin

-Touch receptors are in both the outer layer (epidermis) and the underlying layer (dermis)

-Multiple types of touch receptors; receptors form the basis for multiple "channels" that contribute to the overall sense of touch; shape, temperature, texture

-Each touch receptor has three attributes:

a. Type of stimulation the receptor responds to (pressure, vibration, or temperature changes)

b. Size of the receptive field: the extent of the body area to which teh receptor will respond.

c. Rate of adaptation

- A fast-adapting receptor responds with lots of action potentials when its preferred stimulus is first applied and when it is removed but not in between.

- A slow-adapting receptor remains active throughout the period when the stimulus is in contact with its receptive field.

2. Tactile receptors

-Four types of receptors: mechanoreceptors because they respond to mechanical stimulation or pressure

a. Meissner corpuscles, Merkel cell neurite complexes, Pacinian corpuscles, and Ruffini endings

b. Meissner and Merkel receptors are located at the junction of the epidermis and dermis; enlarged endings of nerve fibers that have smaller receptive fields than Pacinian and Ruffini which are in the dermis and subcuticle

c. The four types of receptors can be characterizzed by their adaptation rates and sizes of receptive fields (look at table in 289)

d. Each receptor has a different range of responsiveness and is responsible for perceiving a different feature of mechanical stimulation

e. SAI respond to fine spatial details; important in texture and pattern perception

f. SAII respond to sustained downward pressure; lateral skin stretch when you grasp an object.

g. FAI respond to low-freq vibrations; feel the motion of coffee cup slipping acorss your fingers

h. FAII detect high-freq vibrations when object first makes contact with skin; object in hand contacts another object

3. Kinesthetic receptors

-Another type of mechanoreceptors that lie within msucles, tendons and joints; play rorle in our sense of where our limbs are and what kinds of movement they are making

-Spindles: muscle receptors that perceive the angle formed by a limb; convey the rate that the muscle fibers are changing in length

- Receptors in the tendons provide signals about hte tension in muscles attached to the tendons and receptors directly in the joints themselves come into play when a joint is bents to an extreme angle

4. Thermoreceptors
- Located in both the epidermis and dermis; changes in skin temperature
- Warmth fibers fire when the temp of skin surrounding the fibers rises; cold fibers (outnumbers warmth fibers) fire in response to decrease in temp
- Fire when you touch something that is warmer or colder than your skin

5. Nociceptors
- Signals pain; are touch receptors that have bare nerve endings and that respond to various forms of tissue damage
- Two types: A-delta fibers respond primarily to strong pressure or heat and are myelinated which allows them to conduct signals rapidly; C fibers are unmyelinated and respond to intense stimulation such as pressure, temp, or poisonous chemicals; both are smaller in diameter
- Pain in two stages: quick sharp burst of pain followed by throbbing sensation; A-delta fibers respond and then C fibers

6. From Skin to Brain

- Axons of various tactile receptors are combined into single nerve trunks in the same way that retinal ganglion axons converge in the optic nerve and cochlear hair cells converge in the auditory nerve.

- A number of somatosensory nerve trunks; axons in the older nerve trunks synapse first in the spinal cord.

- In spinal cord, touch information proceed upward toward the brain via two pathways

a. Spinothalamic pathway is the slower of the two and carries most of the information from thermoreceptors and nociceptors; includes a number of synapses within the spinal cord, thus slowing conduction while providing a mechanism for inhibiting pain perception

b. The dorsal-column-medial-lemniscal (DCML) pathway: wider-diameter axons and fewer synases and therefore conveys information more quickly to brain; planning and executing rapid movements; carries signals from skin, muscles, tendons and joints

c. Neurons in DCML make first synapse in the medulla; then passed to neurons that synapse in the ventral posterior nucleus of the thalamus à somatosensory area 1 (S1) à somatosensory area 2 (S2)

- Mapped somatotopically in correspondence to the skin

- Somatosensory cortex is organized into sensory homunculus which is a spatial map of the layout of the skin; twin homunculi; the left-hemisphere S1 receives information from the right side of the body

7. Pain
- Analgesia and gate control theory: damping of pain without losing consciousness- In soldiers caused by endogenous opiates: chemicals that block the release or uptake of NT to transmit pain
- Gate control theory: pain sensations can be blocked by a feedback circuit located in an area called substantia gelatinosa of the dorsal horn of the spinal cord.
- Inhibitory signals from the gate neurons cancel transmission to the brain.
- Gate neurons activated by expreme pressure, or cold.

8. Pain sensitization
- Nociceptive pain: ongoing damage to the body's tissue; once damaged, the site becomes more sensitive, triggers pain more readily than before --> hyperalgesia = heightened response
- Resulting pain is inflammatory
- Neuropathic pain: damage to nervous system

9. Cognitive aspects of pain
- the sensation of pain and the emotion that accompanies it

III. Tactile Sensitivity and Acuity
1. How finely can we resolve spatial details?
- Two-point touch threshold: the smallest separation at which you can tell that you are being touched by two points and not just one
- Low two-point threshold only when the density of receptors is relatively high, the receptive fields are small and cortical convergence does not occur

Summary:
1. The sense of touch produces a number of distinct sensory experiences, each mediated by its own sensory receptor system (s). Touch sensors are responsive not only to pressure, but also to vibration, temperature, and noxious stimulation. The kinesthetic system, which also contributes to our sense of touch, is further involved in sensing limbs in space.

2. The skin is the largest sensory organ, covering the entire exterior surface of the body. Four classes of pressure-sensitive (mechano-) receptors have been found within the skin. The organs used to sense limb position and movement (namely, our muscles, tendons, and joints) ar emore deeply situated within the body. Thermoreceptors respond to changes in skin temperature that occur, for example, when we contact objects that are warmer or cooler than our bodies. Nociceptors signal tissue damage (or its potential) and give rise to sensations of pain.

3. The pathways from touch receptors to the brain are complex. Two major pathways have been identified: a fast pathway that carries information from mechanoreceptors, and a slower one that carries thermal and nociceptive information. Only the second pathway synapses when it first enters the spinal cord. These pathways project to the thalamus and from there to the primary somatosensory area, located in the parietal lobe just behind the central sulcus. This area contains several somatotopically organized subregions, in which adjacent areas of the body project to adjacent areas of the brain.

4. Downward pathways from the brain play an important role int he perception of pain. According to the gate control theory, signals along these pathways interact at the spinal cord with those from the periphery of the body. Such interactions can block the pain signals that would otherwise be sent forward to the brain. The sensation of pain is further moderated by areas in the cortex.

5. Investigators have measured sensitivity to mechanical pressure by applying nylon hairs of different diameters to the skin. They determine spatial acuity of the skin by measuring the two-point touch threshold, and more precisely by discriminating the orientation of gratings applied to the skin. Tactile pressure sensitivity and spatial acuity vary with body site, because of varying concentrations of different types of mechanoreceptors. The minimum depression of the skin needed to feel a stimulus vibrating at a particular rate provides a measure of vibration sensitivity.

6. The sense of touch is intimately related to our ability to perform actions. Signals from the mechanoreceptors are necessary for simple actions such as grasping and lifting an object. Conversely, our own movements determine how touch receptors respond and, hence, what properties of the concrete world we can feel. Touch is better adapted to feeling the material properties of objects than it is to feeling their shapes, particularly when an object is large enough to extend bejond the fingertip.

PSY 129 Chapter 9

Chapter 9: Hearing: Physiology and Psychoacoustics

I. What is Sound?

- Sounds are created when objects vibrate

- Sound waves travel faster through denser substances

- Sonic boom: when objects passes the sound waves that it is creating; huge pressure fluctuation

1. Basic Qualities of Sound Waves: Frequency and Amplitude

- The difference between the highest pressure and lowest pressure is called amplitude or intensity of a wave; loudness

- Frequency: how quickly the pressure fluctuates; hertz – one cycle per second; pitch – high freq = high pitch

- Speech, music, audible range, high risk threshold, pain threshold

- Sound levels are measured by decibels: difference between two sounds in terms of the ratio between sound pressures; small decibel changes can correspond to large physical changes

2. Sine Waves, Complex Tones, and Fourier Analysis

- Sine wave: pure tone; simplest kinds of sounds; air pressure changes continuously at same frequency; not common

- Complex tones: different frequencies, combination of different sine waves

- Fourier analysis: any sound can be divided into a set of sine waves

- Spectrum: energy at each frequency

- Timbre: quality of a sound that depends upon the relative energy levels of harmonic components.

II. Basic Structure of the Mammalian Auditory System

1. Outer Ear

- Pinna: the curly structure on the side of the heard that first collect sounds from the environment

- Sound waves funneled by the pinna into the ear canal; ear canal enhance sound frequencies; main purpose is to insulate the tympanic membrane (eardrum) from damage.

-Tympanic membrane: a thin sheet of skin that movies in and out in response to the pressure changes of sound waves

2. Middle Ear

- The tympanic membrane is the border between the outer ear and the middle ear

- Middle ear consists of three tiny bones called ossicles that amplify sound waves

a. First ossicle is malleus: connected to the tympanic membrane and second ossicle

b. Incus: second ossicle; connected to stapes

c. Stapes: third ossicle; transmits the vibrations of sound waves to the oval window

- Oval Window: another membrane that borders between the middle and inner ear

- Ossicles: smallest bones in the body; amplifies sound vibrations

a. joints between the bones are hinged to make them work like levers; small energy on one side becomes larger on the other; lever action increases the pressure change by 33%

b. increase energy transmitted to the inner ear by concentrating energy a larger to a smaller surface area; the tympanic membrane is 18 times as large as the oval window

c. the pressure on the oval window is magnified 18 times

d. Amplification allows us to hear faint sounds; inner ear is fluid-filled chambers; need more energy to move liquid than air.

e. Loud sounds: middle ear has two muscles – tenor tympanic (attached to malleus) and stapedius (attached to the stapes); smallest muscles; tense to loud sounds, restricting the movement of ossicles and muffling pressure changes that may cause damage à acoustic reflex

f. Acoustic reflex help for sustained loud environments but not abrupt loud sounds

g. Muscles tense when swallowing, talking, helping to keep auditory system from being overwhelmed by general body movement sounds.

3. Inner ear

- Sound pressure translated into neural signals; analogous to retina

- Cochlear canals and membranes:

a. Cochlear: tiny coiled structure in the temporal bone of the skull; size of pea; filled with watery fluids in three parallel canals: tympanic canal (scala tympani); vestibular canal (scala vestiguli) and the middle canal (scala media)

b. Tympanic and vestibular canals are connected by a small opening, helicotrema, and wrapped around the middle canal

c. T and V canals blow up and fold back on itself; middle canal is another balloon that is squeezed lengthwise

d. The three canals are separated by two membranes: Reissner’s membrane (between vestibular and middle canal) and Basilar membrane (between middle and tympani canal

e. Basilar membrane is not a membrane but a plate made up of fibers that have stiffness; forms the base of the cochlear partition – a complex structure through which sound waves are transduced into neural signals.

f. Vibrations through the tympanic membrane and middle ear bones cause stapes to push and pull the oval window in and out of the vestibular canal at the base of the cochlea

g. A “bulge” forms in the vestibular canal and travels from the base of the cochlear down to the apex; by the time the traveling wave reaches the apex, its displacement has mostly dissipated; if sounds are intense, pressure is transmitted back to the cochlear base through the tympanic canal, where it is absorbed by another membrane – round window

h. When vestibular canal bulges out, it pressures the middle canal; displaces cochlear partition

- The organ of Corti

a. Movements of cochlear partition are translated into neural signals by organ of Corti which goes from the top of the basilar membrane.

b. Organ of Corti made up of specialized neurons called hair cells, dendrites of auditory nerve fibers that terminate at the base of hair cells, and a scaffold of supporting cells

c. Hair cells: support the stereocilia that transducer mechanical movement into neural activity sent to the brain stem; also receive inputs from the brain

d. Auditory nerve fivers: collection of neurons that convey information from hair cells to (afferent) and from (efferent) the brain stem; includes neurons for the vestibular system

e. Hair cells are arranged in four rows that run down the length of the basilar membrane

f. Inner and outer hair cells provide the foundation for minuscule hair-like bristles called stereocilia which are hair-like extensions on tips of hair cells that initiate the release of neurotransmitters when they are flexed

g. Tectorial membrane: not really a membrane either; attached on one end and floats above the outer hair cells on the other end; taller stereocilia of outer hair cells are in the tectorial membrane, and the cilia of inner hair cells are nestled against it; shears across the width of the cochlear partition whenever partition moves à causes the stereocilia of both inner and outer hair cells to bend back and forth.

h. Deflection of hair cells’ stereocilia causes a voltage change that releases NT à firing by auditory nerve fibers with dendritic synapses on hair cells.

i. Summary 216

- Coding of amplitude and frequency in the cochlea

a. As amplitude increases, tympanic membrane and oval window move more à larger bulge in the vestibular canal à cochlear partition to move farther up and down à tectorial membrane to shear across the organ of Corti more forcefully à hair cells to bend back and forth more à more NT release à faster firing of auditory nerve fiber action potential

b. Different parts of the cochlear partition are displaced to different degrees by different sound wave frequencies

c. High freq cause displacements closer to the oval window, near the base of the cochlea, and lower freq cause displacements nearer to the apex à different parts of cochlea are tuned to different freq à place coding for sound freq

d. Cochlear freq tuning is caused by the way the structure of the basilar membrane changes along the length of the cochlea

e. Cochlea becomes narrower from base to apex but the basilar membrane becomes wider toward the apex; the basilar begins thicker at the base and thinner as it gets wider

f. Higher freq bend the narrower, stiffer regions of the basilar membrane near the base more, the lower freq cause greater displacements in the wider, more flexible regions near the apex

- Inner and Outer Hair cells

a. Afferent fibers: auditory nerve fibers that give information to the brain; synapse on the inner hair cells

b. Efferent fibers: take information from the brain; synapse to outer hair cells; the longer they synapse, the stiffer the cochlear partition à less sensitive to pressure changes

c. Outer hair cells: feedback system

4. The Auditory Nerve

- Response of individual AN fibers to different freq are related to their place along the cochlear partition à freq selectivity

- Characteristic frequency: the freq that increases the neuron’s firing rate at the lowest intensity; the lowest point on the threshold tuning curve

- Transduction of acoustic energy at different freq to neural responses: low-intensity sine wave tone with a certain freq will cause certain AN fivers to increase their firing rates; as long as the brain knows which AN fibers have which characteristic freq, the brain can interpret the pattern of firing rates across all the AN fibers to determine the freq of any tone

-Two-Tone Suppression

a. A decrease in the firing rate of one auditory nerve fiber due to one tone, when a second tone is presented at the same time; caused by mechanical changes to the basilar membrane

-Rate saturation

a. For relatively quiet sounds, the neuron is still selectively tuned, but at louder sounds, the neuron fire at about the same rate for any freq; freq such as 1000 Hz to which AN fiber had no response at low intensity, had substantial response when intensity is increased.

b. Rate saturation: broadening of freq selectivity; the point at which a nerve fiber is firing as rapidly as possible and further stimulation is incapable of increasing the firing rate.

c. For moderately intense tones, the brain cannot rely on a single AN fiber to determine freq

d. Solution: use AN fibers with different spontaneous firing rates

e. Low-spontaneous fibers: auditory nerve fibers with low rates of spontaneous firing; require intense sound before firing at higher rates; cones; require higher intensity but retain freq selectivity over a broad range of intensity

f. High-spontaneous fibers: auditory nerve fibers with high rates of spontaneous firing; increase firing to low levels of sound; reaches saturation quickly à poor freq selectivity when intensity is high

g. Mid-spontaneous fibers: medium rates

- The Temporal Code for Sound Freq

a. Another way to encode freq; phase locking: AN fibers fire action potentials at one particular point in the phase of a sound wave

b. AN fibers fire when stereocilia of hair cells move in one direction but not in the other direction

c. Phase locking à firing patter of an AN fiber carries a temporal code for sound freq

d. Volley principle: multiple neurons can provide a temporal code for freq if each neuron fires at a distinct point in the period of a sound wave but does not fire on every period; “took turns”

5. Auditory Brain Structures

- Cranial Nerve 8; from cochlea to the brain stem; AN gibers synapse in the cochlear nucleus; neurons fire when multiple freq are heard but stop firing if the sound continues playing

- Cochlea à superior olive à inferior colliculus à medial geniculate nucleus (thalamus) à cerebral cortex

- Tonotopic organization: an arrangement in which neurons that respond to different freq are organized anatomically in order of freq

- TO is maintained in the primary auditory cortex (A1): neurons from A1 project to the belt area and neurons from this belt synapse with neurons in the parabelt area

-Large proportion of processing is done before A1

III. Basic Operating Characteristics of the Auditory System
-Psychoacoustics: the physical characteristics of sounds and the impressions of these sounds for listeners.
-Inequality of sound pressure and loudness: equal amplitude sounds can be perceived as softer or louder depending on the freq
-The loudness of sound depends on how long the sound is: longer sounds are louder
-The difference between the intensity at which a neuron just starts firing and the intensity at which te neuron's firing rate saturates is less than the window that humans can detect loudness differences
-AN fibers have different intensity thresholds; a population can encode a broader range of intensities

1. Frequency and Pitch
- For any freq increase, listeners perceive a greater rise in pitch for lower freq than they do for higher freq.
- Critical bandwidth: adding more energy to the noise stops affecting the detectability

IV. Hearing Loss
1. Damage to any structures along the chain of auditory processing
2. Conductive hearing loss: middle-ear bones lose their ability to conduct vibrations from tympanic membrane to oval window; otitis media: middle ear fills with mucus during ear infections
3. Otosclerosis: abnormal growth of the middle ear bones
4. Sensorineural hearing loss: inside the cochlea; damage of hair cells

Summary:
1. Sounds are fluctuations of pressure. Sound waves are defined by the frequency, intensity (amplitude), and phase of fluctuations. Sound freq and intensity correspond to our perception of pitch and loudness, respectively.
2. Sound is funneled into the ear by the outer ear, made more intense by the middle ear, and gtransformed into neural signals by the inner ear.
3. In the inner ear, cilia on the tops of inner hair cells are flexed by pressure fluctuations in ways that provide information about freq and intensity to the auditory nerve and the brain. Auditory nerve fibers convey information through both the rate and the timing patterns with which they fire.
4. There are multiple places in the brain stem where different characteristics of sounds are processed before information reaches the cortex. Information from both ears is brought together very early in the chain of processing. At each stage of auditory processing, including primary auditory cortex, neurons are organized in relation to the freq of sounds (tonotopically).
5. Humans and other mammals can hear sounds across an enormous range of intensities. Not all sound freq are heard as being equally loud. Hearing acorss such a wide range of intensities is accomplished by the use of many auditory neurons. Some neurons respond across certain levels of intensity; others span different levels of intensity. In addition, more neurons overall respond when sounds are more intense.
6. A series of channels (or filters) processes sounds within bands of feq. Depending on freq, these channels vary in how wide (many freq) or narrow they are. Consequently, it is easier to detect differences between some freq than between others. When energy from multiple freq is present, lower-freq energy makes it relatively more difficult to hear higher freq.
7. Hearing loss is caused by damage to the bones of the middle ear, to the hair cells in the cochlea, or to the neurons in the auditory nerve. Although hearing aids are helpful to listeners with hearing impairment, they cannot restore hearing as well as glasses can improve vision.

Ecn 135
Problem set #5
Due Nov. 14th

1) An expectation may fail to be rational if

relevant information was not available at the time the forecast is made.
relevant information is available but ignored at the time the forecast is made.
information changes after the forecast is made.
information was available to insiders only.

2) According to rational expectations theory, forecast errors of expectations

are more likely to be negative than positive.
are more likely to be positive than negative.
tend to be persistently high or low.
are unpredictable.

3) The efficient markets hypothesis suggests that if an unexploited profit opportunity arises in an efficient market

It will tend to go unnoticed for some time.
It will be quickly eliminated.
financial analysts are your best source of this information
prices will reflect the unexploited profit opportunity

4) A phenomenon closely related to market overreaction is

The random walk.
The small-firm effect.
The January effect.
Excessive volatility.

5) The president from which Federal Reserve Bank always has a vote in the Federal Open Market Committee?

Philadelphia
Boston
San Francisco
New York

6) Which of the following is an entity of the Federal Reserve System?

U.S. Treasury Secretary
The FOMC
The Comptroller of the Currency
The FDIC

Chapter 7, questions #9 and #15
9. "If stock prices did not follow a random walk, there would be unexploited profit opportunities in the market." Is this tatement true, false, or uncertain? Explain your answer.

False. Efficient market hypothesis says that stock prices should follow random walk - that is, future changes in stock prices should be unpredictable. If it is not random walk, then prices are predictable and people will exploit any unexploited profit opportunities even easier.

15. "If most participants in the stock market do not follow what is happening to the monetary aggregates, prices of common stocks will not fully reflect iinormation about them." Is this statement true, false, or uncertain? Explain your answer.

Chapter 12 question #4
4. In what ways can the regional Federal Reserve banks influence the conduct of monetary policy?
a. Their directors "establish" the discount rate (although the discount rate in each district is reviewed and determined by the Board of Governors).

b. They decide which banks, member and nonmember alike, can obtain discount loans from the Federal Reserve bank.

c. Their directors select one commerical banker from each bank's distric to serve on the Federal Advisory Council, which consults with the Board of Governors and provides information that helps in the conduct of monetary policy.

d. Five of the twelve bank presidents each have a vote in the Federal Open Market Committee, which directs open market operations (the purchase and sale of government securities that affect both interest rates and the amount of reserves in teh banking system). As explained in the Fed box, "The Special Role of the Ffederal Reserve Bank of New York," the president of the New York Fed always has a vote inthe FOMC, making it the most important of the banks; the other four votes allocated to the district banks rotate annually among the remaining eleven presidents.

PSC129: Chapter 5 The Perception of Color

I) Basic Principles of color Perception
-Color is the result of the interaction of physical stimulus with a particular nervous system.

1. The Problem of Univariance
-Different wavelengths of light give rise to different experiences of color, and the varying responses of this photoreceptor to different wavelengths could provide a basis for color vision.
-Problem: two different wavelengths can produce the same response –
-Output of a single photoreceptor is ambiguous à problem of univariance
II) Trichromacy
1. Rods and Cones
-Rods: sensitive to low light (scotopic); contain photopigment, rhodopsin; have same sensitivity to wavelength à can’t tell color
-Cones: three types of photoreceptors with different photopigment which give each type of cone a distinctive wavelength sensitivity
a. S-cones: short-wavelength cones; 440nm; blue cone
b. M-cones: middle-wavelength cones; peak at 535nm; green cone
c. L-cones: long-wavelength cones; peak at 565nm; red cone
-Different outputs from the three cones; any wavelength will produce a unique set of three responses
-If increase intensity of light, the response sizes wil change but the proportions will not
-Trichromacy: the theory that the color of any light is defined in our visual system by the relationships between a set of three numbers, the outputs of three receptor types now known to be the three cones.

2. Metamers
-Usually see a mixture of wavelengths
-A single wavelength can excite the cones equally
-The rest of the nervous system knows only what the cones tell it.
-Metamers: different mixtures of wavelengths that look identical; if mixture of red plus green produces the same cone output as the single wavelength of yellow, then the mixture and the single wavelength must look identical and are called metamers.
a. Mixing wavelengths does not change the physical wavelengths; If mix 500 and 600, the stimulus contains 500 and 600 nm wavelengths and not 550.
b. For the mixture of red and green light to look perfectly yellow, we would have to have just the right red and just the right green.

3. Lights and Fingerpaints
-Additive color mixture: a mixture of lights; taking one wavelength and adding it to another
-Subtractive color mixture: a mixture of pigments; if pigments a and b mix, some of the light shining on the surface will be subtracted by a, and some by b. Only the remainder contributes to the perception of color; pigment absorbs some wavelengths, subtracting them from white light and reflecting the rest.
-Hue: the chromatic aspect of color (red, blue, green, etc.)
-Saturation: the amount of hue present in a light; white has zero saturation and red is fully saturated
-Brightness: physical intensity of light; the distance from black (zero brightness) in color space

III) Opponent Processes
1. Opponent Cells in the Lateral Geniculate Nucleus
-Some cells are excited by the L-cone onset in their center and inhibited by M-cone onsets in their surrounds --> color-opponent cell
-Color-opponent cell: a neuron whose output is based on a difference between sets of cones; different sources of chromatic information are pitted against each other
-Opponent color theory: the theory that perception of color is based on the output of three mechanisms, each of them on an opponency between two colors: red-green, blue-yellow, and black-white.

2. Psychophysical Roots of Opponent Color Theory
-Red and green are opposed to each other
-Unique hues: red, yellow, blue and green; can only be described with one color

3. Afterimages
-Negative Afterimages: used to see opponent colors in action
a. If look at one color, a subsequent achromatic region will appear to take on a color opposite to the original color
b. The first colored stimulus is called the adapting stimulus
c. The illusory color is the negative afterimage
-Neutral point: the point at which an opponent color mechanism is outputting no signal

4. Color in the Visual Cortex
-In opponent-process, found three opponency: red-green, blue-yellow, and black-white
-Mismatch between color perception and responses of LGN cells: LGN is not the end of color processing
-Axons go to visual cortex from LGN; LGN contains cells whose opponency is based on adding and subtracting the outputs of cones
-Achromatopsia: loss of color vision

IV) Does Everyone See Colors the Same Way?
1. Does Everyone See Colors the Same Way? - Yes
-Standard measures of color vision is same as others

2. No
-Color blindness: genes don't encode one or more of the three cone photopigments
a. Genes coding M and L-cone photopigments are in the X chromosome
b. Can still see color but 2D
-Deuteranope: has no M-cones; classify 560 and 610 lights as the same
-Protanope: no L-cones
-Tritanope: no S-cones
-Color anomalous: have three cone photopigments, but two is very similar
-Cone monochromat: one type of cone in retina; world is a shade of gray
-Agnosia: can see but fail to recognize
-Anomia: can recognize but fail to name

3. Maybe
-Cultural relativism: determined in part by the cultural environment.
-Color perception is not much influenced by culture and language

V) From the Color of Lights to a World of Color
-Unrelated colors: a color that can be experienced in isolation
-Related colors: a color, such as brown or gray, that is seen only in relation to other colors.

1. Color Constancy
-Illuminant: the light that illuminates a surface; not all illuminants are the same
-Color constancy: the tendency for colors to appear relatively unchanged in spite of substantial changes in the illuminant.

2. Problem witht he Illuminant
-Reflectance: percentage of light that is reflected
-What we perceive is the combination of illuminant and reflectance
-Mondrians: stimuli that are strongly influenced by the environment; the presence of other colors allowed the colors of the test patches to remain constant over a change of illumination

3. Physical Constraints Make Constancy Possible
-Assumptions of physics of the world influence color perception

Summary
1. Probably the most important fact to know about color vision is that lights and surfaces look colored because a particular distribution of wavelengths of light is being analyzed by a particular visual system. Color is a psychophysical phenomenon, not a physical phenomenon. Many animal species have some form of color vision. It seems to be important for identifying possible mates, possible rivals, and good things to eat. Color vision has evolved several time in several different ways in the animal kingdom.
2. Rod photoreceptors are sensitive to low (scotopic) light levels. There is only one type of rod photoreceptor. It yields one "number" for each location in the visual field. Rods can support only a one0dimensional representation of color from dark to light. Thus, scotopic vision is achromatic vision.
3. There are three types of cone photoreceptors with different sensitivities to the wavelength of light. Cones operate at brighter light levels, producing three "numbers" at each location; the pattern of activity over the different cone types defines the color.
4. If two regions of an image produce the same response in the three cones types, they will look identical; that is, they will be metamers. And they will look identical even if the physical wavelengths coming from the two regions are different.
5. In additive color mixture, two or more lights are mixed. Adding a light that looks blue to a light that looks yellow will produce a light that looks white. In subtractive color mixture, paints or other pigments that absorb some wavelengths and reflect others are mixed. Mixing a typical blue paint an a typical yellow paint will subtract most long and short wavelengths from the light reflected by the mixture, and the result will look green.
6. Information from the three cones is combined to form three opponent processes. Cones sensitive to long wavelengths (L-cones) are pitted against medium-wavelength (M) cones to create an L-M process that is roughly sensitive to the redness or greenness of a region. L+M cones are pitted against short-wavelength (S) cones to create a process roughly sensitive to the blueness or yellowness of a region. The third process is sensitive to the overall brightness of a region.
7. Color blindness is typically caused by the congenital absence or abnormality of one cone type - usually the L or M cones, usually in males. Most color-blind individuals are not blind to differences in wavelength. Rather their color perception is based on the outputs of two cone types instead of the normal three.
8. The goal of color vision is to describe the properties of surfaces in the world and to ignore the color of the light shining on the surface. Mechanisms of color constancy use implicit knowledge about the world to correct for the influence of different illuminants and to keep the apple looking red under a wider range of conditions.

PSC129: Chapter 4 Perceiving and Recognizing Objects

I) Middle Vision
1. Finding Edges
-Goal of middle vision: to organize the elements of a visual scene into groups that we can recognize as objects.
-Occasional lack of edge - visual system fills it in.
-Illusory contours: edges that are perceived despite they don't exist; Kaniza figure; contradicts structuralists
-Structuralists: Wilhelm Wundt and Edward Titchener; sum of atoms of sensation gives perception; complex objects are made up of components
-Gestalt: the whole is greater than the sum of the parts; Max Wertheimer, Wolfgang Kohler, Kurt Koffka
-Gestalt grouping rules: guide the visual system in its interpretation of the raw retinal image
a. Good continuation: two elements will tend to group together if they seem to lie on the same contour; continuing in same direction; group edges that hve the same orientation
-Perceptual "committees": come together to voice opinion on what the stimulus is
-Occlusion: an image stop because there is another contour occluding it

2. Texture Segmentation and Grouping
b. Similarity: Gestalt principle; two features to group together if they are similar in color, size, orientation and form
c. Proximity: Gestalt principle; two features to group together if they are close
d. Parallelism: weaker principle; for figure-ground assignment that parallel contours are likely to belong the the same figure.
e. Symmetry: symmetrical regions are more likely to be seen as a figure.
f. Common region: two features group together if they appear to be part of the same larger region
g. Connectedness: two items will tend to group together if they are connected
h. Common fate: group together if they are doing same thing or moving together; form perceptual group
i. Synchrony: all items in a set change at the same time, they tend to be grouped together even if they change in different ways.

3. Perceptual Committees Revisited
-Middle vision: collection of specialists, each with a specific area of expertise about what the input might mean. Goal is to come to single answer.
-Feature demons, cognitive demons, decision demon.

4. Committee Rules: Honor Physics and Avoid Accidents
-Ambiguous figure: generates two or more plausible interpretations
-Necker cube: every image is ambiguous but perceptual committees comes up with final interpretation
-Accidental viewpoint: a viewing position that produces some regularity in the visual image that is not present in the world; eg. four surfaces with different shapes, arranged in different orientations, and at different distances seen as four square regions at a very precise location

5. Figure and Ground
-The ability to distinguish figures (object in the foreground) from ground (surfaces or objects lying behind the figures) is a process called figure-ground assignment
-Rubin Vase/Face figure: analogous to Necker cube; ambiguous
-Principles
a. Surroundedness: if one region is entirely surrounded by another, it is likely that the surrounded region is the figure
b. Size: the smaller region is likely the figure
c. Symmetry: a symmetrical region is more likely to be seen as figure.
d. Parallelism: regions with parallel contours are more likely to be seen as figure

6. Dealing with Occlusion
-In real world, objects are often partially hidden by other objects
-Edges can relate across gaps: relatability: the degree to which two line segments appear to be part of the same contour
-Two edges are relatable if they can be connected with a smooth curve but not if the connection requires an S curve
-Nonaccidental feature: a feature of an object that is not dependent on the exact viewing position of the observer

7. Parts and Wholes
-Global superiority effect: properties of the whole object take precedence over parts of the object
-One heuristic used by perceptual committees when dividing objects into parts is the pair of concavities created when one object is pushed into another

8. Interim Summary
-Five principles
a. Bring together that which should be brought together: Gestalt principles and occlusion
b. Split asunder that which should be split asunder: edge0finding processes that divide regions from each other; figure-ground mechanisms
c. Use what you know: two dimensional edge configurations are taken to indicate 3-d corners or occlusion borders, and objects are divided into parts on the basis of an implicit knowledge of the physics of image formation
d. Avoid accidents: avoid interpretations that require the assumptions of highly specific, accidental combinations of features or accidental viewpoints.
e. Seek consensus and avoid ambiguity: using the preceding four principles, the "committees" of middle vision must come up with one interpretation which serve as input for processes that will recognize objects

II) Object Recognition
1. Templates versus Structural Descriptions
-Naive template theory: visual system recognizes objects by matching the neural representation of the image with a stored representation of the same "shape" in the brain; have too many templates
-Structual description: objects that are the same share a basic structure; a specification of an object in terms of its parts and the relationship between the parts.
a. Key component: object parts are represented in the structural descriptions
b. Generalized cylinders; superquadratics (3D shapes); geons (geometric ions)
-Recognition by components model: Biederman's model of object recognition, which holds that objects are recognized by the identities and relationships of their component parts.
a. Geons and relationships can be recognized at any angle; they are viewpoint invariant

2. Problems with Structural Description Theories
-Object recognition is not totally viewpoint invariant
-Geons may not be the language of recognition
-Template-like representations called views: the more the object was rotated, the longer it took to name it
a. Suggests that people store a template-like representation of the object and recognize the objects in the surprise phase by mentally rotating the misoriented objects back to the upright views they have stored in memory.
-Objects have a viewpoint-dependent component but view-based models have their own problems

3. Multiple Recognition Committees
-Takes longer to recognize objects at the subordinate levels than at the entry level.
-When naming atypical member of a category, it is faster to name it at subordinate level
-The visual system is employing several different object recognition committees, each working with their own sets of tools, at the same time.

4. Faces: An Illustrative Special Case
-Prosopagnosia: an inability to recognize faces; can recognize its a face but can't tell who
-The two levels of face recognition are not completely different systems
-Double dissociation: truly separate brain modules; one function can be damaged without harm to the other

III) Objects int he Brain
-Cells in primary visual cortex (striate cortex) respond to edges or lines; they have small and precise receptive fields
0Some striate cortex cells are involved in middle-vision processes such as grouping and texture segmentation
0Other middle-vision tasks such as the completion of illusory contours are handled in extrastriate cortex which lie just outside the primary visual cortex.
a. From extrastriate cortex of the occipital lobe, visual inormation moves out along two main pathways.
b. One pathway heads up into the parietal lobe; process inofrmation relating to the location of objects in space and actions to interact with them; the where pathway
c. The second pathway leads to the temporal lobe; the what pathway; explicit acts of object recognition
-Agnosia: psychic blindness; failure to recognize objects typically due to brain damage
-Inferotemperal cortex (IT): part of cerebral cortex in the lower portion of temporal lobe, important in object recognition
a. Cells in IT cortex have receptive field that spread over half or more of the field of view.
b. Doesn't get excited by spots and lines but by objects
-Hierarchy of visual perception: small receptive fields and simple features of visual cortex were combined with ever-greater complexity as one moved from striate cortex to IT cortex, eventually culminating in a cell that fires; idea of grandmother cell

Summary
1. After early visual processes have extracted basic features from the visual input, it is the job of middle vision to organize these features into the regions, surfaces, and objects that can, in turn, serve as input to object recognition and scene understanding processes.
2. Perceptual "committees" serve as an important metaphor in this chapter. The idea is that many semi-independent processes are working on the input at the same time. Different processes may come to different conclusions about the presence of an edge or the relationship between two elements in the input. Under most circumstances, we see the single conclusion that the committee settles on.
3. Multiple processes seek to carve the input into regions and to define the edges of those regions, and many rules are involved in this parsing of the image. For example, image elements are likely to group together if they are similar in color or shape, if they are near each other, or if they are connected to each other. Many of these grouping principles were first articulated by members of the Gestalt school.
4. Other, related processes seek to determine if a region is part of a foreground figure, like this black O, or part of the background, like the white area around the O. These rules of grouping and figure-ground assignment are driven by an implicit understanding of the physics of the world. Thus, events that are very unlikely to happen by chance (eg two contours parallel to each other ) are taken to have meaning. (Those parallel contours are likely to be part of the same figure.)
5. The processes that divide up visual input into objects and background have to deal with many complexities. Among these are occlusion - the fact that parts of objects may be hidden behind other objects, and the fact that objects, themselves, have a structure. Is your nose an object or a part of a larger whole? What about glasses or hair or a wig?
6. Template models of object recognition hold that an object in the world is recognized when its image fits a particular representation in the brain in the way that a key fits a lock. It has always been hard to see how naive template models could work because we might need one "lock" for every object in every orientation in every position in the visual field.
7. Structural models propose that objects are recognized by the relationship of parts. Thus, an H could be defined as two parallel lines with a perpendicular line joining them between their centers. A cat would be more difficult, but similar in principle. Such models are viewpoint-dependent. The orientation of the H doesn't matter. Object recognition, however, is often viewpoint-dependent, suggesting that the correct model lies between the extremes of naive template matching and pure structural description.
8. Faces are an interesting special case in which viewpoint is very important. Upright faces are much easier to recognize than inverted faces are. Moreover, some regions of the brain seem to be specifically interested in faces. They lie near other regions in the temporal lobes that are important for recognition of other sorts of objects.

PSC129: Chapter 3 Spatial Vision

I) Visual Acuity: Oh Say, Can You See?
-Vision scientists talk about acuity in terms of the smallest visual angle of a cycle of the grating that you can perceive.
-A cycle is one repetition of a black and white stripe.
-Visual angle is the angle that would be formed by lines going from the top and bottom of a cycle, through the center of your lens, and on to the retina.
-Visual angle of resolution acuity by dividing the size of they cycle by the viewing distance, then taking the arc tangent of this ratio. Usually = 0.017 degrees.
-Resolution acuity represents the finest high-contrast detail that can be resolved, which is determined by the spacing of photoreceptors in the retina.
-The visual system samples the grating through the array of receptors at back of retina.
-If the receptors are spaced such that the whitest and blackest parts of the grating fall on separate cones. If the entire cycle falls on a single cone, we will see nothing but a gray field or aliasing in which the cycles seem to be longer than it is.
-Cones in fovea are 0.008 degrees apart; two cones are 0.017 degrees apart.
-Rods less packed in periphery so acuity is less in periphery than fovea.

1. A Visit to the Eye Doctor
-Herman Snellen: block letter where the length is five times as long as the stroke.
-Visual acuity = (distance you can identify)/(distance normal vision can identify)
2. Acuity for Low-Contrast Stripes
-Otto Schade - sine wave gratings at different spatial frequencies and adjust contrast.
-Spatial frequency: number of sine wave gratings per unit space; cycles per degree
-Contrast sensitivity function (CSF): is U-shaped; y-axis - reciprocal of contrast threshold; red line the borderline of visibility.

II)Retinal Ganglion Cells and Stripes
-Retinal ganglion cells like spots of light; responds to certain types of stripes.
-ON retinal ganglion cell
a. responds weakly to low spatial frequency because part of grating lands in the inhibitory surround
b. high also weak because both stripes fall within receptive-field center
c. cell responds vigorously when the bright bar fill the center and dark bars in the surround.
d. tuned to specific spatial frequency
-Respond to specific position within the receptive field - its phase.
-Net difference in the light intensity in the receptive field's center and surround.

III) The Lateral Geniculate Nucleus
1. Retinal ganglion cell synapse in the two LGNs which is a relay station from the retina to the cortex.
2. Bottom two layers of LGN is larger than the top four.
-Top four: parvocellular layers; bottom two: magnocellular layers
-Parvocellular receive from midget ganglion cells; magnocellular receive from parasol ganglion cells.
-Magnocellular: large, fast-moving objects; parvocellular: details of stationary objects.
3. The left LGN receives projections from the left sides of both retinas and the right LGN receives from the right sides of the retina.
4. Layers 1,4,6 receives input from the contralateral (other) eye; layers 2,3,5 from ipsilateral (same) eye.
5. Each layer contains organized map of half of visual field.
6. Topographical mapping: ordered mapping of the world onto visual nervous system; know where things are in space.
7. LGN neurons: concentric receptive fields; respond to spots and gratings.
8. LGN is area where feedback from brain modulates input from eyes.

IV) Striate Cortex
-Has six main layers; LGN project to layer 4.
1. Cortical Topography and Cortical Magnification
-2 features of visual cortex
a. Topographical mapping: objects in areas 3,4 of the striate cortex tells visual system that the object is in positions 3,4 of visual field.
b. Scaling of information: objects near fovea are processed in a large part of striate cortex. The distortion of visual map on cortex is cortical magnification.

V) Receptive Fields in Striate Cortex
-receptive fields of striate cortex neurons are not circular as in retina and LGN but are lines.
1. Orientation Sensitivity
-Orientation tuning: cell is tuned to specific orientation; some cells fire vigorously at specific orientation and declines elsewhere; all the neurons as a whole detects all possible orientation.
-Circular receptive fields in LGN transformed into elongated receptive fields in striate cortex: concentric LGN cells that feed into a cortical cell are all in a row

2. Other Receptive-field properties
-Cortical cells respond to gratings (collection of lines) of certain spatial frequency; respond to smaller range of spatial frequency than ganglion cells.
-Narrow tuning of cortical cells: filter for part of image that excites cell.
-Respond well to moving lines, bars, edges and gratings in one direction.
-Receive input from both eyes but have ocular dominance - respond better with input from one eye.

3. Simple and Complex Cells
-Simple cells: neurons that have clearly defined excitatory and inhibitory regions; phase-sensitive
-Complex cells: tuned to particular orientation, spatial frequency, and ocular preference; will respond if stripe is in receptive field regardless of location; phase-insensitive

4. Further complications
-End stopping: a property of some cells in striate cortex; increase firing rate when bar elongated to fill receptive field but decreases when the bar stretches out of field.
-Hypercomplex cells: cells with end stopping
-End stopping play an important role to detect luminance boundaries and discontinuities.

VI) Columns and Hypercolumns
-Neurons with similar orientation preferences are arranged into columns that extended vertically through cortex
-All the orientations were 0.5mm apart
-Hypercolumn: a 1mm block of striate cortex containing two sets of column with one preferring right eye and the other left.

VII) Selective Adaptation: The Psychologist's Electrode
-Expose cells to certain orientation; stimulus will fatigue cells with that orientation preference

1. The Site of Selective Adaptation Effects
-Transfer of adaptation effects from one eye to another indicate that selective adaptation occurs in cortical neurons and not retinas or LGNs.

2. Combing Spatial frequency and orientation selectivity
-Cell respond to specific orientation and specific spatial frequency.

3. Spatial Frequency-Tuned Pattern Analyzers in Human Vision
-Fergus Campbell and John Robson: human contrast sensitivity function reflects sensitivity of multiple individual pattern analyzers
-Spatial frequency channels: patter analyzers, implemented by ensembles of cortical neurons, with each set of neurons tuned to a limited range of spatial frequencies.
-Multiple spatial frequency model: spatial freq that stimulate different pattern analyzers will be detected independently even if the different freq are combined in the same image
-Visual system use spatial freq filters to analyze images because different spatial freq emphasize different information.
-Zebra: how many - low freq channels; details - high freq channels
-At near-threshold contrasts, pattern analyzers operating at different scales of analysis are independent; at high contrasts, pattern analyzers interact

VIII) The Girl Who Almost Couldn't See Stripes
-During critical period, normal binocular visual stimulation is required for normal cortical development.
-Cortical neurons are being wired up to their inputs from the two eyes.
-Strabismus: a misalignment of the two eyes, so that a single object in space is imaged on the fovea of one eye, and on a nonfoveal area of the other eye.

Vocabulary:
1. Contrast: The difference in illumination between a object and the background, or between brighter and dimmer parts of the same object.
2. Acuity: the smallest spatial detail that can be resolved.
3. Visual Angle: the angle subtended by an object at the retina.
4. Cycle: for a grating, a pair consisting of one dark bar and one bright bar.
5. Sine wave grating: a grating with a sinusoidal luminance profile.

Summary:
1. In this chapter we followed the path of image processing from the eyeball to the brain. As we saw, neurons in the cerebral cortex translate the array of stars perceived by retinal ganglion cells into the beginnings of forms and patterns. We learned that the primary visual cortex is organized into thousands of tiny computers, each responsible for determining the orientation, width, color, and other characteristics of the stripes in one small portion of the visual field. In Chapter 4, we will continue this story by seeing how other parts of the brain combine the outputs from these minicomputers to produce a coherent representation.
2. Perhaps the most important feature of image processing is the remarkable transformation of information from the circular receptive fields of retinal ganglion cells to the elongated receptive fields of the cortex.
3. Cortical neurons are highly selective along a number of dimensions, including stimulus orientation, size, direction of motion, and eye of origin.
4. Neurons with similar preferences are often arranged in columns in primary visual cortex.
5. Selective adaptation provides a powerful, noninvasive tool for learning about stimulus specificity in human vision.
6. The human visual cortex contains pattern analyzers that are specific to spatial frequency and orientation.
7. Normal visual development requires normal visual experience. Abnormal visual experience early in life can cause massive changes in cortical physiology that result in a devastating and permanent loss of spatial vision.

Chapter 2: An Overview of the Financial System

Summary
1. The basic function of financial markets is to channel funds from savers who have an excess of funds to spenders who have a shortage of funds. Financial markets can do this either through direct finance, in which borrowers borrow funds directly from lenders by selling them securities or through indirect finance, which involves a financial intermediary that stands between the lender-savers and the borrower-spenders and helps transfer funds from one to the other. This channeling of funds improves the economic welfare of everything int eh society. Because they allow funds to move from people who have no productive investment opportunities to those who have such opportunities, financial markets contribute to economic efficiency. In addition, channeling of funds directly benefits consumers by allowing them to make purchases when they need them most.

2. Financial markets can be classified as debt and equity markets, primary and seondary markets, exchanges and over-the-counter markets, and money and capital markets.

3. The principal money market instruments (debt instruments with maturities of less than one year_ are US Treasury bills, negotiable bank certificates of deposit, commercial paper, banker's acceptances, repurchase agreements, federal funds, and Eurodollars. The principal capital market instruments (debt and equity instruments with maturities greater than one year) are stocks, mortgages, corporate bonds, US government securities, US government agency securities, state and local government bonds, and consumer5 and bank commercial loans.

4. An important trend in recent years is the growing internationalization of financial markets. Eurobonds, which are denominated in a currency other than that of the country in which they are sold, are now the dominant security in the international bond market and have surpassed US corporate bonds as a source of new funds. Eurodollars, which are US dollars deposited in foreign banks, are an important source of funds for American banks.

5. Financial intermediaries are financial institutions that acquire funds by issuing liabilities and, in turn, use those funds to acquire assets by purchasing securities or making loans. Financial intermediaries play an important role in the financial system because they reduce transaction costs, allow risk sharing, and solve problems created by adverse selection and moral hazard As a result, financial intermediaries allow small savers and borrowers to benefit from the existence of financial markets, thereby increasing the efficiency of the economy.

6. The principal financial intermediaries fall into three categories: a. banks - commercial banks, savings and loan associations, mutual savings banks, and credit unions. b. contractual savings institutions - life insurance companies, fire and casualty insurance companies, and pension funds; and c. investment intermediaries - finance companies, mutual funds, and money market mutual funds.

7. The government regulates financial markets and financial intermediaries for two main reasons: to increase the information available to investors and to ensure the soundness of the financial system. Regulations include requiring disclosure of information to the public, restrictions on who can set up a financial intermediary, restrictions on what assets financial intermediaries can hold, the provision of deposit insurance, and reserve requirements.

Chapter 1: Why Study Money, Banking, and Financial Markets?

Summary
1. Activities in financial markets have direct effects on individuals' wealth, the behavior of businesses, and the efficiency of our economy. Three financial markets deserve particular attention: the bond market (where interest rates are determined), the stock market (which as a major effect on people's wealth and on firms' investment decisions), and the foreign exchange market (because fluctuations in the foreign exchange rate have major consequences for the US economy).

2. Banks and other financial institutions channel funds from people who might not put them to productive use to people who can do so and thus play a crucial role in improving the efficiency of the economy.

3. Money appears to be a major influence on inflation, business cycles, and interest rates. Because these economic variables are so important o the health of the economy, we need to understand how monetary policy is and should be conducted. We also need to study government fiscal policy because it can be an influential factor in the conduct of monetary policy.