Warm-Up Draw a correctly-labeled graph showing potential output and equilibrium price and output for: Long-run equilibrium Recessionary gap Inflationary gap Identify which gap is likely to occur as a result of the shutdown.

Money Chapter 30: Money, Banking and the Federal Reserve System (pages 798-803)

Roles Money Plays Medium of Exchange Store of value Used to buy/sell goods Makes trading easier Eliminates need to barter Store of value Lasts over time Get paid now and spend later

Roles Money Plays Unit of Account Tells how much goods are worth Stated in terms of currency and not other goods

Good For Money or No? Item Medium of Exchange? Store of Value? Unit of Account? Salt  Cattle Gold  Copper coins Beaver pelts Personal checks Debit card Credit card $100 bill

Item #1 – iPhone 7

Item #2 – Chipotle for Life

Item #3 – World Series Tickets

Brain Break Who appears on the: $1 bill $2 bill $5 bill $10 bill Penny Nickel Dime Quarter Half-Dollar

Why Gold?

Money Supply M1  Currency in circulation M2  M1 + “near monies” Cash, checks, traveler’s checks Most basic definition M2  M1 + “near monies” Savings, CDs, money markets More expansive definition

M1 + Savings + Money Market + CDs Money Supply M2 M1 + Savings + Money Market + CDs M1 Checks + Cash

Calculating M1 and M2 Use the data below to calculate M1 and M2 (assume anything not mentioned = $0) Items Amount Checkable deposits $850 Currency $200 Large time deposits $800 Non-checkable savings deposits $302 Small time deposits $1,745

Calculating M1 and M2 M1 = $850 + $200 = $1,050 Items Amount Checkable deposits $850 Currency $200 Large time deposits $800 Non-checkable savings deposits $302 Small time deposits $1,745 M1 = $850 + $200 = $1,050 M2 = M1 + $302 + $1,745 = $3,097