Money and Monetary Policy Review Topcs

Name______________________________________

Nadramia/AP Economics

 

Monetary Policy Review Sheet

 

Chapter 13

The three functions of money

M1, M2, M3

Fiat vs Commodity Money

3 types of demand for money

The money market:  factors affecting money supply and demand for money

The Federal Reserve:  what does it control, how are Board members selected etc.

 

 

Chapter 14

How do banks create money:  goldsmith vs. banker

Reserve ratio

Reserve Requirement

New money created by a single bank (equal to that bank’s excess reserves)

New money created by banking system (equal to excess reserves times money multiplier

Money multiplier formula

 

 

Chapter 15

Monetary policy vs fiscal policy

Goals of monetary policy

Easy vs tight money policies

Effects on real GDP, price level

Effects on interest rates

Effects on real wages

3 tools of the Federal Reserve

Most/least frequently used tools

 

Graphs

The money market

Investment demand

Impact of monetary policy on the economy (AS/AD)