{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

AP Economics Study Guide - where for a given period M = the...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
AP Economics Study Guide – January 29, 2008 Money – is anything that is commonly accepted as a means of payment for goods and services. M1 – is the sum of coin and paper money plus checking deposits and traveler’s checks. M2 – is M1 plus savings deposits, small time deposits (deposits less than $100,000 with a fixed  term of maturity such as CDs), money market mutual funds, and Eurodollar deposits (overnight,  dollar-dominated deposits in European banks). M3 – is M2 plus large time deposits, Eurodollar time deposits, and other less liquid assets. Money Multiplier =  1/ required reserve ratio.  The total amount of deposits resulting from an  initial deposit that is ultimately held as reserves is conveniently found using the  Money  Multiplier . MV=PQ:    is the equation of exchange is a definitional relation of multiplied terms: MV = PQ 
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: where for a given period: M = the quantity of the money in circulation V = the Velocity of money (how fast each unit of money is changing hands on average) PQ = money value of expenditures P = the price level Q = is an index of expenditures What increases the velocity of money? – institutional change Monetary Policy: Monetary policy is the process by which the government, central bank, or monetary authority manages the supply of money, or trading in foreign exchange markets. Increase in M → Rise in P → Fall in value of M Decrease in M → Fall in P → Rise in value of M This relationship forms the basis of the monetary policy ....
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern