Unit 3 Financial System

Macroeconomics Unit 3 Financial System

Big ideas for this unit:

Monetary Policy

Money Market

Loanable Funds Market

Open Market Operations

Central Banks

Money Expansion/Contraction

Interest rates

Essential Questions:

What is actual versus potential growth in national output

What are output gaps in monetary policy?

What is Money supply (theory)?

What is the Quantity theory of money (MV = PT)?

What is broad money supply?

What is difference between Money Supply and Monetary Base?

What are the sources of money supply in an open economy (commercial banks and credit creation, role of central bank, deficit financing, quantitative easing, total currency flow)?

What is the transmission mechanism of monetary policy?

What is the different theoretical approaches to how the macro economy functions?

What is the demand for money and interest rate determination?

Important terms:

Characteristics of money and near money

M1, M2 and M3 money

The multiple expansion of checkable deposits

The Federal Reserve: the mechanics of monetary policy

The Money Market

The Federal Reserve: monetary policy and macroeconomics

Real interest rates and nominal interest rates

Monetary policy

money and interest rate determination

Quantity theory of money (MV = PT)

Discount rate and Fed Funds rate

Please check out this calendar with all the classes and topics intended to be covered for Unit 3.

https://docs.google.com/document/d/1VnM5xaaSBN5zlsu8wVJVuZ5K1lmZfOFxSqfkA0vQuq4/edit

This is the AP Microeconomics Problem Bank for Unit 3.

https://docs.google.com/document/d/1EQ1j7vNo2RRuV0yWLu4istCuFdsawitS15BEMCmj2rU/edit

This is a study guide for Unit 3:

https://docs.google.com/presentation/d/1srcEWOc23V3eji7thQZkn0N4skq5wyKLdfO5QPDheuc/edit#slide=id.p

This is the link to this unit's summative assessment

https://docs.google.com/document/d/17SFdEEQkeSRkJ1QRNGmS74b8Je8GVAtDKxYmvkz884U/edit

Asynchronous Guide for Unit 3:

The following is the link for Paul Krugman's book

https://drive.google.com/drive/folders/1wKE2GfZakJnQHde9Eo5dCxDV28SwiYJB

These are the modules that have to be read for this unit:

2015 Edition Krugman

The Meaning of Money pg 837-843

The Monetary Role of Banks pf 843-853

Monetary Policy 871-892

Appendix 30 Two Models of Interest Rate 897-900

Previous Krugman Book

Module 23, Savings, Investment and the Financial Sector pg 232 to 237

Module 24 Time Value of Money pg 238-243

Module 25 Banking and Money Creation pg 244-253

Module 26 and 27 The FED pg 254-260

Module 27 The FED: Monetary Policy pg 261-266

Module 28: The Money Market pg 267-275

Module 29: The Market for Loanable Funds pg 276 to 286

Jacob Clifford Financial Assets

https://www.youtube.com/watch?v=kR_4_a5R3Co

Jacob Clifford Money Market

https://www.youtube.com/watch?v=vc7wmTT8m0M&t=23s

Jacob Clifford How Banks Create Money

https://www.youtube.com/watch?v=JG5c8nhR3LE

Jacob Clifford Money Supply Shifters

https://www.youtube.com/watch?v=QpS81Zwxwgs

Class 1: Savings, Investment and the Financial Sector

Whiteboard explanation of Money Market

Check out portfolio activity:

https://docs.google.com/document/d/18qalEd1xLDsXp4-HWSLMUdO2t_SWY1AtcuCMsDOSdmA/edit

Vocabulary for Financial Sector

HW: Module 23, Savings, Investment and the Financial Sector pg 232 to 237

Class 2: Money

Check out portfolio activity:

https://docs.google.com/document/d/18qalEd1xLDsXp4-HWSLMUdO2t_SWY1AtcuCMsDOSdmA/edit

True and False questions (Problem Bank). Answer the in notebook and graphically explain 4 questions.

Class 3: Financial Sector

MV=PQ, Investments=Savings, Uses and Classification of Money, Governments Budgets

Worksheet

https://docs.google.com/document/d/1CpLzjI2BgMvsSnQHkZxefJufIH4PgP2fwudO5i8sNRU/edit?usp=sharing

HW: Module 24 Time Value of Money pg 238-243

Class 4: Time Value of Money

1. Please fill out the following survey about banks:

https://docs.google.com/forms/d/1VQYp9maP5re95_ST6mg5i1tywv7LQhR18XP60qBSFPs/edit

2. Watch Jacob Clifford

https://www.youtube.com/watch?v=nfkqCv3Rd_g

3. Time value equation and nominal vs real interest rate on board

4. Begin Time Value Workshop

https://docs.google.com/document/d/1CpLzjI2BgMvsSnQHkZxefJufIH4PgP2fwudO5i8sNRU/edit

HW: Read: The Money Market pg 267-275

Class 5: AP Review

Please complete the quiz "Unit 4 MCH 1" in the AP Platform.

Once you are finished, graphically explain 5 questions. There must be at least one graph. This activity is part of your portfolio.

Class 6: AP Review

Please complete the quiz "Unit 2 Progress Checks" in the AP Platform.

Class 7: Money Multiplication

Watch the following video:

https://www.youtube.com/watch?v=JG5c8nhR3LE

Please make a 6x5 chart in your notebook that has the following items:

Vertically: stages 1, 2,3,4

Horizontally: Currency (cash), (checkable) bank deposits, Money Supply, Aggregate Reserves and Monetary Base

Note: Required reserves are 14%.

Explain how money is multiplied in these four stages and how the horizontal items change in these. Answer the following questions:

What is the value of M0 and M1 at the 4rth stage?

What is the composition of the monetary base at the 4rth stage?

What is the final increase in Money Supply?

Suppose that the FED buys bonds for $1000. What is the final increase in Money Supply if the required reserves at 14%?

Watch AP Video on Money Multiplication

Read: The Money Market pg 267-275

5. Who is in the what bills...

AP Formative

Answer the following question

https://docs.google.com/document/d/1b06uZ--QYFunn0Mol29I4ZLcLDhp4oWtr3La4imNfDU/edit

Class 6: The Money Market

Whiteboard explanation of Money Market

Workshop

3. Read The Market for Loanable Funds pg 276 to 286

Class 7

Summative project work

Class 8:

Class 9: The Money Market

Class 10: The Market for Loanable Funds

Class 11: Unit 3 Review

Class 12: Unit 3 Summative Evaluation

Class 13: FED Report