MESSENTIALQUESTIONSF10 - Money and Banking - Sheflin...

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Money and Banking - Sheflin Essential Questions in Money and Banking 11/21/2010 Many/most Final Exam multiple-choice questions will deal with these issues (as did the HW assignments in one form or another). If you can answer these in words, you should have no trouble with the multiple choice questions on the final. If you cannot, look up the answers and if still having trouble, post on the FINAL EXAM RELATED chat room that will be available after Thanksgiving. Graph means show the appropriate graphical analysis – aggregate Supply and Demand, Money Supply and Demand, Yield Curve, etc. Arrow diagram means be able to trace out steps - M ↑→ i ↓→ I ↑→ D ↑→ P ,Y Equation means be able to write out a related equation NOTE THAT WE HAVE NOT COVERED ALL OF THIS YET MONEY 1. What is Money? Wealth? Income? 2. Define M1, M2? 3. What are the functions of money? 4. Why are the advantages of an economy using money rather than barter? 5. What is barter and what are the shortcomings of barter? 6. Distinguish between commodity money, full-bodies representative money, fiat money 7. What are some key milestones in the evolution of money in the U.S.? 8. What is seignorage? 9. What is liquidity? 10. What is the payments system? MONETARY THEORY In the Short-Run (Keynesian Model) 1. What determines aggregate prices and output? 2. What determines interest rates in the short-run? 3. How does fiscal policy affect the economy? Graph, “arrow” diagram. 4. How does the stock market affect the economy? Graph, “arrow” diagram. 5. How does money “matter” (impact the economy) in the short-run? Graph, “arrow” diagram. 6. What are some additional channels by which money impacts the economy? Graph, “arrow” diagram. 7. What is Keynesian liquidity preference, speculative demand for money? 8. What is the liquidity trap? Why does it matter? 9. What is inflation and what can cause it in the short-run? Graph, arrow diagram 10. What is the short-run Phillips curve and why is it important? Graph, “arrow” diagram. 11. What is a Keynesian explanation of the cause of the current recession?
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In the Long-Run (Classical/Monetarist Model) 1. What determines output and unemployment? Graph 2. What determines prices? 3. What determines interest rates? 4. What is Say’s law? 5. What are the assumptions and implications of the Quantity Theory? equation 6. What is velocity? equation 7. What role does money have in the classical model? “arrow” diagram . 8.
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MESSENTIALQUESTIONSF10 - Money and Banking - Sheflin...

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