ECON 105.08
**Final is cumulative- this review should be used along with Midterm 1 and 2 reviews**
Review for Final (Last 1/3 of the book)
Chapter 14: Money, Banks, and the Federal Reserve System
Key Terms
Asset
Bank panic
Bank run
Commodity money
Discount loans
Discount rate
Excess reserves
Federal Open Market Committee (FOMC)
Federal Reserve System
Fiat money
Fractional reserve banking system
M1
M2
Monetary policy
Money
Open market operations
Quantity theory of money
Required reserve ratio
Required reserves
Reserves
Simple deposit multiplier
Velocity of money
Concepts
 Know the types of money- commodity money and fiat money.
 Know the functions of money- Medium of exchange, unit of account, store of wealth, and
standard of deferred payment.
 What can serve as money?
 How do we measure money, or how do we define money? (M1, M2, M3)
 If I withdraw money from my savings accounts how are M1, M2, M3 affected? If I
withdraw money from my checking account how are M1, M2, and M3 affected?
 How do central banks (the fed) create money?
1
 𝑑𝑒𝑝𝑜𝑠𝑖𝑡 (𝑚𝑜𝑛𝑒𝑦)𝑚𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 =
𝑅𝑒𝑠𝑒𝑟𝑣𝑒 𝑅𝑎𝑡𝑖𝑜 (𝑅𝑅)
1
 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑐ℎ𝑒𝑐𝑘𝑖𝑛𝑔 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑑𝑒𝑝𝑜𝑠𝑖𝑡𝑠 = 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑏𝑎𝑛𝑘 𝑟𝑒𝑠𝑒𝑟𝑣𝑒𝑠 × 𝑅𝑅
 How is the Fed organized? What Fed reserve(s) is New Mexico under? Who is the
chairman of the Fed?
 How does the Fed manage money supply? (open market operations, discount policy,
reserve requirements)
 Be able to solve for items out of the quantity equation: 𝑀 × 𝑉 = 𝑃 × 𝑌 or we can rewrite
the equation using growth rates 𝑚 + 𝑣 = 𝑝 + 𝑦.
ECON 105.08
**Final is cumulative- this review should be used along with Midterm 1 and 2 reviews**
Chapter 15: Monetary Policy
Key Terms
Contractionary monetary policy
Expansionary monetary policy
Federal funds rate
Inflation targeting
Monetary policy
Concepts
Know the goals of monetary policy- price stability, high employment, economic growth, stability
of financial markets.
Be able to replicate the money market model (Money supply=Money demand)
Through the money market model, show how the nominal interest rate changes when money
supply increases/decreases.
Why does the money demand shift?
What is the federal funds rate?
How do interest rates affect AD?
If we were in a recession how would the Fed bring us back to potential GDP?
If we were in an expansion how would the Fed bring us back to potential GDP?
Be able to show the answers to the above two questions using AD/AS analysis.
Chapter 16: Fiscal Policy
Key Terms
Budget deficit
Budget surplus
Crowding out
Fiscal policy
Multiplier effect
Concepts
 Be able to explain fiscal policy verbally and graphically using AD/AS analysis.
(Expansionary and contractor policy)
 How does the government spending multiplier work? Explain verbally and graphically
using AD/AS analysis.
 How does the tax multiplier work? Explain verbally and graphically using AD/AS
analysis.
 How does fiscal policy affect the budget deficit?
 Why is fiscal policy more complicated than it appears?
“Macroeconomic policy is more of an art than a science.” (Macroeconomics, Colander)