AP Macroeconomics Unit 4 blog videos

Part 1
- The 3 main types of money are Commodity money, which means good for good (cow for flour), the second type is Representative money, which uses gold or silver (gold standard), the last type of money which is the most current type is Fiat money which is money that is accepted by everyone and backed by the government. Money is known as a medium of exchange in which case every one accepts it across the country. Money is also a store of value, which means the money you put in will be the same amount as when you take it out. Money is a unit of account, that implies the price is worth the quantity in which you buy it at.

Part 3- Money market graphs are labeled by the interest rate being the Y-axis and Commodity being the X-axis. The graph will slope upward is the price is low and the demand is high and will slope downward when its the exact opposite. The graph is vertical because its not varying and is fixed by the Fed. The MMG will shift left or right depending on the demand for money unless changed by the Fed, the only way to change the supply of money is for the government increase or decrease during inflation or recession.

Part 4
- The two options to use during money policy is expansionary money (easy $) and Contractionary money (tight $). The first part is Reserve requirement In which they lower money supply during expansionary and raise with contractionary. With Discount rate the Fed will lower during expansionary and raise with contractionary. With expansionary the Fed will buy bonds and with contractionary the Fed will sell bonds.

Part 7
- With the Loanable Funds graph Price is on the Y-axis and Quantity of funds is on the X-axis. Demand for loanable funds is downward sloping, and Supply for loanable funds is sloping upwards. Supply for loanable funds is dependent on savings and it will increase when people have an incentive to spend money and decrease when people wants to save. If the government is running a deficit, that means the government is demanding money and the demand for loanable funds will increase.

Part 8
- Money creation process consists of two parts first one being money multiplier and second is multiple deposit expansion. During the money creation process governments create money by making loans.This increase is from the Multiple deposit expansion which affects the entire banking system but it is only a potential increase.For example the Reserve Requirement is 20% and the loan amount is $500, the total created is $2500 using (1/RR X loans)

Part 9
- When comparing MMG, LFG, and AD-AS curve graph they all correlate one what or another typically if one shifts to the right all of them shifts to the right. Lets say that in the MMG the government they increase the demand in money (which shifts to the right), when looking at LFG which also increase the quantity in loanable funds (shits the the right) and in the AD-AS graph the AD increases (also shifting to the right). The change in the supply of money is equal to the change in the price of money. Fisher effect says that if price increases then the other supply of money increases or vice versa.