18–23% of the AP exam. Key topics: Money: functions (medium of exchange, store of value, unit of account), types (M1, M2), Money creation through the fractional reserve banking system; money multiplier (1 / reserve requirement ratio), Money market: money supply (vertical) and money demand; nominal interest rate determination, Loanable funds market: real interest rate determination; saving supply and investment demand, Federal Reserve structure and monetary policy tools: open market operations, discount rate, reserve requirements, Expansionary vs. contractionary monetary policy and the transmission mechanism to AD.
Study guide content for this unit is being prepared. Check back soon for complete lesson notes, formula sheets, and worked examples.
