Module 10. FINANCIAL INTERMEDIATION, MONEY & THE FEDERAL RESERVE SYSTEM

1. What is money and why is it important to our economy?
2. Are savings accounts money? Explain.
3. Is U.S. currency backed by gold or anything else? Why do people work hard to get it?
4. What is the primary role of our banking system?
5. Explain how banks can create money.
6. What is the money multiplier? How is it calculated? How is it related to the creation of money?
7. Describe the structure and roles of the Federal Reserve.
8. What is a stock? What is a bond? Why would a company prefer to issue one over the other? Why would a person prefer to buy one over the other?
9. What is limited liability and why is it important for the stock market?
10. What is the Principle-Agent Problem?
11. What is The Efficient Markets Theory? What is a Mutual Fund? How are these two concepts related?

Module 11. THE AGGREGATE DEMAND AND SUPPLY MODEL

1. What does an aggregate demand curve represent?
2. What are the three reasons the aggregate demand curve is downward sloping?
3. What government policies can shift the aggregate demand curve?
4. What does the aggregate supply curve represent?
5. Why is the short-run aggregate supply curve different than the long-run aggregate supply curve?
6. When aggregate demand shifts to the right, what happens to price level, output, and unemployment in the short-run? (Note that employment is not explicitly shown on the AD/AS model but will generally move in the same direction as output.) Does your answer depend on whether the economy is currently in a recession or at its potential GDP?
7. When the short-run aggregate supply shifts to the right, what happens to price level, output, and unemployment?

Module 12. MONETARY POLICY

1. Who is responsible for setting monetary policy in the U.S.? How is this group chosen?
2. If the Fed wants to increase the money supply, list and describe 3 ways they can accomplish this.
3. Under what economic conditions would the Fed wish to increase (expansionary policy) or decrease (contractionary policy) the money supply?
4. How would an increase in the money supply likely affect interest rates, investment, aggregate demand, the price level, output, and employment?
5. Why might monetary policy fail? What does "inflation targeting" mean?