This lesson covers Topics 4.1, 4.3, and 4.4 in the AP Syllabus. Today we will learn about the meaning and purpose of money and other financial assets, how banks create money, and the ideas related to bank balance sheets.
Learning Target
Use current data to explain the influence of changes in spending, production, and the money supply on various economic conditions.
Use economic indicators to analyze the current and future state of the economy.
Criteria for Success
I will be able to use ideas related to the AS-AD model and the models of the money market and market for loanable funds to analyze economic problems.
I will be able to demonstrate this understanding using graphs of the aforementioned models.
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Assignments
Read: Krugman (Modules 22-24)
Watch: The video lectures for today's topic (linked above). NOTE THERE ARE THREE TODAY.
Optional: The videos linked below.
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.