SECTION 5 STUDY GUIDE

MODULES 23-33

Reading Guide 20: Module 23-24 (pp. 232 – 242) The Financial Sector

Module 23 The Meaning of Money In this Module, you will learn to:

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The Meaning of Money

WHAT IS MONEY?

ROLES OF MONEY

Medium of Exchange Store of Value Unit of Account

TYPES OF MONEY MEASURING THE MONEY SUPPLY

Checking Your Understanding 2.

Tackle the test: Multiple-Choice Questions 1. 2. 3. 4. 5.

Module 24 The Time Value of Money In this Module, you will learn to:

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The Concept of Present Value

Borrowing, Lending, and Interest

Defining Present Value Using Present Value

Tackle the test: Multiple-Choice Questions 1. 2. 3. 4. 5.

Tackling the Test: Free-Response Question 1a 2a.

b. b.

Reading Guide 21: Module 25 (pp. 244 – 251) The Financial Sector

Module 25 Banking and Money Creation In this Module, you will learn to:

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The Monetary Role of Banks

WHAT BANKS DO

BANK REGULATION

Deposit Insurance Capital Requirements Reserve Requirements The Discount Window

Determining the Money Supply

HOW BANKS CREATE MONEY

Figure 25.1

Figure 25.2

RESERVES, BANK DEPOSITS, AND THE MONEY MULTIPLIER

THE MONEY MULTIPLIER IN REALITY

Tackle the test: Multiple-Choice Questions 1. 2. 3. 4. 5.

Tackling the Test: Free-Response Question Remember to EXPLAIN… Remember to EXPLAIN… 1a 2a.

b. b.

c. c.

Figure 25.3

Table 25.1 How Banks Create Money

Figure 25.4 The Monetary Base and the Money Supply

Reading Guide 22: Module 27 (pp. 261 – 265) The Financial Sector

Module 27 The Federal Reserve System: Monetary Policy In this Module, you will learn to:

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The Federal Reserve System

THE FUNCTIONS OF THE FEDERAL RESERVE SYSTEM

Provide Financial Svc Supervise & Regulate Maintain the Stability Conduct Monetary of Fin. Sys. Policy

What the Fed Does

THE RESERVE REQUIREMENT THE DISCOUNT RATE

OPEN-MARKET OPERATIONS

Figure 27.1 The Federal Reserve’s Assets and Liabilities

The European Central Bank

Tackle the test: Multiple-Choice Questions 1. 2. 3. 4. 5.

Tackling the Test: Free-Response Question 1a.

Remember to Explain…

b.

Reading Guide 23: Module 28 (pp. 267 – 273) The Financial Sector

Module 28 The Money Market In this Module, you will learn to:

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The Demand for Money

THE OPPORTUNITY COST OF HOLDING MONEY

THE MONEY DEMAND CURVE

SHIFTS OF THE MONEY DEMAND CURVE

Changes in the Aggregate Changes in Real GDP Changes in Technology Changes in Institutions Price Level

Figure 28.1 The Money Demand Curve

Money and Interest Rates

THE EQUILIBRIUM INTEREST RATES TWO MODELS OF THE INTEREST RATE

Tackle the test: Multiple-Choice Questions 1. 2. 3. 4. 5.

Tackling the Test: Free-Response Question 1.

2.

Reading Guide 24: Module 31 INFLATION, UNEMPLOYMENT, & STABILIZATION POLICIES

Module 31 Monetary Policy and the Interest Rate In this Module, you will learn to:

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Monetary Policy and the Interest Rate

Monetary Policy and Aggregate Demand

EXPANSIONARY AND CONTRACTIONARY MONETARY POLICY

Figure 31.2 Setting the Federal Funds Rate

Figure 31.3 Expansionary and Contractionary Monetary Policy

AP Exam Tip (p. 304) The Federal Funds Rate: The Discount Rate:

AP Exam Tip (p. 306)

Monetary Policy in Practice

INFLATION TARGETING

(p310) Checking Your Understanding 1. 2. 3.

(p311) Tackle the test: Multiple-Choice Questions 1. 2. 3. 4. 5.

(p311) Tackle the test: Free-Response Questions 2.

What the Fed Wants, the Fed Gets (p. 310)

Reading Guide 25: Module 32 & 33 INFLATION, UNEMPLOYMENT, & STABILIZATION POLICIES

Module 32 Money, Output, and Prices in the Long Run In this Module, you will learn to:

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Money, Output and Prices

SHORT-RUN AND LONG-RUN EFFECTS OF AN INCREASE

IN THE MONEY SUPPLY

MONEY NEUTRALITY CHANGES IN THE MONEY SUPPLY AND THE INTEREST RATE IN THE LONG RUN

Figure 32.1

Figure 32.2 _________________________________________________________

(p316) Checking Your Understanding 1.

(p316) Tackle the test: Multiple-Choice Questions 1. 2. 3. 4. 5.

Module 33 Types of Inflation, Disinflation, and Deflation In this Module, you will learn to:

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Money and Inflation

THE CLASSICAL MODEL OF MONEY AND PRICES

INFLATION TAX (OPTIONAL)

THE LOGIC OF HYPERINFLATION (OPTIONAL)

Moderate Inflation and Disinflation

THE OUTPUT GAP AND THE UNEMPLOYMENT RATE

(p316) Tackle the test: Multiple-Choice Questions 1. 2. 3.