1. Module 28 The Money Market

2. Independent, Long FRQ Friday For a daily grade Look over AS/AD notes, and pay attention today!

3. Fed buys $100 in bonds from a bank. The reserve requirement is 10%. 1) How much money can this bank initially lend? 2) What is the maximum increase to the money supply (in the banking system)? 3) What is the maximum change in loans (in the banking system)? Joe deposits $100 cash into his checking account. The reserve requirement is 10%. 4) How much money can this bank initially lend? 5) What is the maximum increase to the money supply (in the banking system)? 6) What is the maximum increase to demand deposits (in the banking system)? A bank has $1,000 in demand deposits, and $200 in reserves. Then the Fed lowers the reserve requirement from 20% to 10%. 7) How much money can this bank now lend?

4. Swap/Grade

5. Answers 1. $100 2. $1,000 3. $900 4. $90 5. $900 6. $1,000 7. $100

6. M28 Money Market

7. New Graph

8. Why is the money supply vertical?

9. Composition of Money Demand Curve Asset Demand for Money: we hold money as a ______ of ________. Transactions Demand for Money: The need for cash to ____ _______.

10. Why Money Demand Curve Slopes Down Asset demand for money goes down when A higher interest rate means

11. Money Demand Curve Shifters Changes in – Aggregate Price Level – GDP: more income means more volume of ____________, Dm ____. Mostly affects the _____________ demand for money. – Technology

12. Money Supply Shifters Monetary policy (all 3)

13. Team Clicker Challenge

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17. GDP increases. A) Dm increases B) Dm decreases C) Sm increases D) Sm decreases

18. Fed buys bonds. A) Dm increases B) Dm decreases C) Sm increases D) Sm decreases

19. Reserve rate rises. A) Dm increases B) Dm decreases C) Sm increases D) Sm decreases

20. Technology leads to widespread credit & debit card use. A) Dm increases B) Dm decreases C) Sm increases D) Sm decreases

21. Price level falls. A) Dm increases B) Dm decreases C) Sm increases D) Sm decreases

22. Open market sales. A) Dm increases B) Dm decreases C) Sm increases D) Sm decreases

23. National income falls. A) Dm increases B) Dm decreases C) Sm increases D) Sm decreases

24. GDP increases. A) Qm up, NIR up B) Qm down, NIR down C) Qm up, NIR down D) Qm down, NIR up E) Qm unchanged, NIR up F) Qm unchanged, NIR down

25. Open market purchases. A) Qm up, NIR up B) Qm down, NIR down C) Qm up, NIR down D) Qm down, NIR up E) Qm unchanged, NIR up F) Qm unchanged, NIR down

26. Price level rises. A) Qm up, NIR up B) Qm down, NIR down C) Qm up, NIR down D) Qm down, NIR up E) Qm unchanged, NIR up F) Qm unchanged, NIR down

27. Technology leads to widespread credit & debit card use. A) Qm up, NIR up B) Qm down, NIR down C) Qm up, NIR down D) Qm down, NIR up E) Qm unchanged, NIR up F) Qm unchanged, NIR down

28. Reserve rate falls. A) Qm up, NIR up B) Qm down, NIR down C) Qm up, NIR down D) Qm down, NIR up E) Qm unchanged, NIR up F) Qm unchanged, NIR down

29. Reserve rate falls AND GDP decreases A) Qm up, NIR up B) Qm down, NIR down C) Qm up, NIR down D) Qm down, NIR up E) Qm up, NIR indeterminate F) Qm down, NIR indeterminate G) Qm indeterminate, NIR up H) Qm indeterminate, NIR down

30. Technology leads to widespread credit/debit card use AND Fed sells bonds A) Qm up, NIR up B) Qm down, NIR down C) Qm up, NIR down D) Qm down, NIR up E) Qm up, NIR indeterminate F) Qm down, NIR indeterminate G) Qm indeterminate, NIR up H) Qm indeterminate, NIR down

31. National income falls AND Reserve Rate Falls A) Qm up, NIR up B) Qm down, NIR down C) Qm up, NIR down D) Qm down, NIR up E) Qm up, NIR indeterminate F) Qm down, NIR indeterminate G) Qm indeterminate, NIR up H) Qm indeterminate, NIR down

32. FRQ Practice With Partners

40. Write Your Answers on the Back

41. Swap/Grade

44. NIR Quantity Of Money Sm Dm