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Review: Chapter 13, 14, 15, 17
I. Chapter 13: Money, bank, The Fed
1. Key Concepts:
Asset, Commodity money v.s. Fiat money, Excess reserves, Open market operations,
Federal Open Market Committee (FOMC), Federal Reserve System, M1,M2, Money,
Quantity theory of money, Required reserve ratio, Required reserves, Reserves, Simple
deposit multiplier
2.
3.
4 Functions of Money:
Medium of exchange, Unit of account, Store of value, Standard of deferred payment
M1 & M2
4. How banks create money?
(1). T account, Reserves, Required Reserve Ratio (Refer to Handout chapter 13(B))
(2). Simple Deposit Multiplier
5. The Fed
(1) Three policy tools of Federal Reserve System:
1 Open market operations
2 Discount policy
3 Reserve requirements
(2) Objectives of Federal Reserve System: Economic Growth, Price stability, High
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Employment, Stable financial system.
6. Quantity Theory of Money:
Inflation rate = Growth rate of the money supply − Growth rate of real output
II. Chapter 14: Monetary Policy
1. Key Concepts:
Contractionary monetary policy, Expansionary monetary policy, Federal funds rate
2. Expansionary and Contractionary Monetary Policy*****
(1). Static AD-AS model
(2). Dynamic AD-AS model
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(3) How do they work?
III. Chapter 15: Fiscal Policy
1. Key Concepts:
Crowding out, Expansionary and Contractionary Fiscal policy, Multiplier effect
2. (1) Static AD-AS model:
(2)Dynamic AD-AS model:
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(3)
3. Multiplier Effect:
4.Money Market;
(1) Fiscal Policy Change Money Demand:
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(2) Monetary Policy Change Money Supply:
6. Crowding out Effect:
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IV. Chapter 17: Open Economy
1. Key Concepts:
Balance of payments, Balance of trade, Current account, Financial account, Closed
economy, Open economy, Currency appreciation, Currency depreciation, Nominal exchange
rate, Real exchange rate, Saving and investment equation
2. Balance of payment:
(1). Current Account: Balance of Trade, Net Investment, Net Transfer
(2). Financial Account:
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3. National saving –Investment Equation:
4. Monetary and Fiscal Policy in Open economy comparing with in Closed Economy
(1) Effectiveness
(2) Why?
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