| Steven M. Reff Economics Lecturer University of Arizona (2007 - 2016) The 2015 University of Arizona Five-Star Faculty Award Steven Reff's Resume |
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Unit 4: Financial Sector
• Topic 4.1 Financial Assets
• Topic 4.2 Nominal v. Real Interest Rates
• Topic 4.3 Definition, Measurement, & Functions of Money
• Topic 4.4 The History of Banking and the Expansion of the Money Supply
• Topic 4.5 The History of the Money Market and Money Market Graph
• Topic 4.6 The Current Monetary Policy (2008 - Present)
• Topic 4.7 The Loanable Funds Market
• Topic 4.1 Financial Assets
• Topic 4.2 Nominal v. Real Interest Rates
• Topic 4.3 Definition, Measurement, & Functions of Money
• Topic 4.4 The History of Banking and the Expansion of the Money Supply
• Topic 4.5 The History of the Money Market and Money Market Graph
• Topic 4.6 The Current Monetary Policy (2008 - Present)
• Topic 4.7 The Loanable Funds Market
| (17% – 27% of the exam) |
| 10 - 12 class periods |
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| Unit 4 Financial Sector |
| Week 8 |
Below are lessons for Unit 4: Topics 4.5 aligned to the AP® Macroeconomics CED.
You will have textbook readings, short videos with 3 multiple choice questions, workbook
assignments, multiple choice questions, "free" response questions and much more.
These resources can be displayed on the instructor's projection system inside the classroom,
or the instructor can copy the links and give to the students as homework.
Link to the AP® Macroeconomics CED (Course and Exam Description) to see in-depth
coverage on each of the topics listed below for Unit 4: Financial Sector.
You will have textbook readings, short videos with 3 multiple choice questions, workbook
assignments, multiple choice questions, "free" response questions and much more.
These resources can be displayed on the instructor's projection system inside the classroom,
or the instructor can copy the links and give to the students as homework.
Link to the AP® Macroeconomics CED (Course and Exam Description) to see in-depth
coverage on each of the topics listed below for Unit 4: Financial Sector.
| Principles of Macroeconomics |
| Remember, you still have all of the resources and assessments that The College Board® provides for you and your students. |
| Day 4: Week 8 |
| Day 1: Week 8 |
Topic 4.5 The History of the Money Market and Money Market Graph
| eVideos -- Short Videos: |
| eWorkbook Activities Interactive: |
| (3 min. or less, along with 3 multiple choice questions) |
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Topic 4.5 The History of the Money Market and Money Market Graph
| Day 2: Week 8 |
| eVideos -- Short Videos: |
| eWorkbook Activities Interactive: |
| eTextbook Reading: |
| (3 min. or less, along with 3 multiple choice questions) |
The Money Market Graph shows the supply of money and the demand for money.
This graph is historically important prior to September of 2008 as it indicated what
happenedto nominal interest rates when there was a change in either of these curves.
This was a period of time of limited reserves.
This graph is historically important prior to September of 2008 as it indicated what
happenedto nominal interest rates when there was a change in either of these curves.
This was a period of time of limited reserves.
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| Prior to 2008, the Federal Reserve System operated in a limited reserves environment where individual commercial banks held both required and excess reserves in their vaults or on reserve with the Federal Reserve. This was covered in this week, Week 7. After 2008 and currently, the Federal Reserve System operates in an ample reserves environment where commercial bank reserves are held at the FED as these banks now receive interest on their reserves sitting at the FED. This will be covered in week 8. |
The money multiplier is the ratio of the money supply to the monetary base.
The size of expansion of the money supply depends on the money multiplier.
The maximum value of the money multiplier can be calculated as the
reciprocal of the required reserve ratio.
The amount predicted by the simple money multiplier may be overstated
because it does not take into account a bank’s desire to hold excess
reserves or the public holding more currency.
When the central bank conducts an open-market purchase (sale) in
an economy with limited reserves, the effect on the money supply
is greater than the effect on the monetary base because of the
money multiplier.
The size of expansion of the money supply depends on the money multiplier.
The maximum value of the money multiplier can be calculated as the
reciprocal of the required reserve ratio.
The amount predicted by the simple money multiplier may be overstated
because it does not take into account a bank’s desire to hold excess
reserves or the public holding more currency.
When the central bank conducts an open-market purchase (sale) in
an economy with limited reserves, the effect on the money supply
is greater than the effect on the monetary base because of the
money multiplier.
Topic 4.2 The History of the Money Market and Money Market Graph
| Day 5: Week 8 |
The Money Market Graph shows the supply of money and the demand for money.
This graph is historically important prior to 2008 as it indicated what happened
to nominal interest rates when there was a change in either of these curves.
This was a period of time of limited reserves.
This graph is historically important prior to 2008 as it indicated what happened
to nominal interest rates when there was a change in either of these curves.
This was a period of time of limited reserves.
NOTE: Students DO NOT have to draw the Keynesian Range (horizontal portion) on their ASAD graphs.
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Topic 4.5 The History of the Money Market and Money Market Graph
| Day 5: Week 8 |
| FRQs covering the Money Market |