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									AP ECONOMICS SYLLABUS-Macro                                              UNIT 3 (15 days)
                           Money and Banking and Monetary Policy
All daily assignments require you to read and take personal notes as well as complete the
designated homework questions before each class!!!
Prep for Day 1: Read Ch. 13.1, 13.2 (Ch. 13 questions 1-6)
Day 1
     List and explain the 3 functions of money
     Define the money supply, M1 and near-monies, M2, and M3
     State 3 reasons why currency and checkable deposits are money and why they have value
     Discussion of homework problems
    HOMEWORK: (Read rest of chapter 13; questions 7-12, 15)
Day 2
     Identify 2 types of demand for money and the main determinant of each
     Describe the relationship between GDP and the interest rate and each type of money demand
     Explain what is meant by equilibrium in the money market and the equilibrium rate of interest
     Explain the relationship between bond prices and the money market
     Describe the structure of the U.S. banking system
     Describe 7 functions of the Federal Reserve System and point out which role is the most important
     Discussion of HOMEWORK problems
    HOMEWORK: (study for quiz)
Day 3
         Ch. 13 quiz / Reading day – Ch. 14.1, 14.2
    HOMEWORK: (finish reading/ note taking)
Day 4
     Recount the story of how fractional reserves began with goldsmiths
     Explain the effects of a currency deposit in a checking account on the composition and size of the money
     Compute a bank’s required and excess reserves when given its balance-sheet figures
     Explain why a commercial bank is required to maintain a reserve and why it isn’t sufficient to cover
     Describe what happens to the money supply when (1) a commercial bank makes a loan or buys securities
         and (2) when a loan is repaid or a bank sells its securities
     Explain what happens to a commercial bank’s reserves and checkable deposits after it has made a loan
     Describe how a check drawn on one commercial bank and deposited in another will affect the reserves and
         excess reserves in each bank after the check clears
     Describe what happens to a single bank’s reserves if it made loans that exceeded its excess reserves
    HOMEWORK: (Ch. 14 questions 1-12)
Day 5
     Discuss homework problems
    HOMEWORK: (Read rest of Ch.14; questions 13-15; and choose 1 of the following questions to complete:
Day 6
     Explain how it is possible for the banking system to create an amount of money that is a multiple of its
         excess reserves when no single bank ever creates money greater than its excess reserves
     Compute the size of the monetary multiplier and the money-creating potential of the banking system when
         provided with appropriate data
     State the two leakages that reduce the money-creating potential of the banking system
     Discuss homework problems
    HOMEWORK: (study for quiz)
Day 7
     Ch. 14 quiz / reading day – chapter 15.1
    HOMEWORK: (finish reading 15.1; questions 1-2)
Day 8
     Identify the goals of monetary policy
     List the principal assets and liabilities of the Federal Reserve Bank
     Discuss homework questions
    HOMEWORK: (Read rest of chapter 15)
Day 9
       Explain how each of the 3 tools of monetary policy may be used by the Federal Reserve (the Fed) to
        expand and to contract the money supply
     Describe 3 monetary policies the Fed could use to reduce unemployment and reduce inflationary pressures
        in the economy
     Explain the cause-effect relationship between monetary policy and changes in equilibrium GDP
     Demonstrate the money market graphically and show how a change in the money supply will affect the
        interest rate
     Show the effects of interest rate changes on investment spending
     Describe the impact of changes in investment on aggregate demand and equilibrium GDP
     Contrast the effects of an easy money policy with the effects of a tight money policy
     Identify the federal funds rate, its relation to the prime interest rate, and its importance for monetary policy
     List 2 strengths and 3 shortcomings of monetary policy
     Describe arguments for and against “inflation targeting” versus a more discretionary “artful management”
        approach to monetary policy
     Explain the net export effect of an expansionary and a contractionary monetary policy
    HOMEWORK: (Ch. 15 questions 2-9)
Day 10
     Discuss homework problems
    HOMEWORK: (study for quiz)
Day 11
     Ch. 15 quiz
    HOMEWORK: (Unit 3 review packet / problems)
Day 12-13
     Discuss review packet answers
    HOMEWORK: (study for unit exam)
Day 14-15
     Multiple Choice exam and FRQ

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