Today we will learn about the meaning and purpose of money and the fractional reserve banking system. Click this link to download a PowerPoint on the topic (Chapter 29 Notes Page). For time value of money read the "Present Value" section in Chapter 27 of Mankiw (Pages 578-580).
Mini-lecture: Introduction to Money
Assignments
Read Mankiw (Chapter 29) and watch the following videos.
Optional: This video gives a short explanation of money's modern origins.
Formative Assessment (MCQ's): You will take a formal assessment during class. The assessment will consist of multiple-choice questions and one FRQ from an old AP Exam. Doing the problem of the day and ensuring that you understand it will help you prepare for today's formative assessment and help to ensure that you understand the concepts in this lesson.
Problem of the Day
Define commodity money and fiat money. Which one do we use?
Explain the three functions of money.
$100 drops from the sky and you pick it up and deposit it in your bank account. Assume that this $100 had not previously been part of the money supply. If the reserve ratio is 10 percent, by how much will the total amount of required reserves in the banking system increase? Explain your answer and show your work.