AP Macroeconomics Problem Set #3
Money, Banking and Monetary Policy
1. Money, Banking and Financial Markets
Define and give specific examples of each of the following:
a. Definition of financial assets: money, stock and bonds
b. Time Value of Money (present and future value).
c. Measures of Money Supply.
d. How banks create money.
e. Money Demand.
f. Money Market – Make sure to include a graph!
g. Loanable Funds Market – Make sure to include a graph!
2. Central Bank and Control of the Money Supply
Define and give specific examples of each of the following:
a. Tools of Central Bank Policy Make sure to provide a complete response here!
b. Quantity Theory of Money
c. Real vs. Nominal Interest Rates
3. Practice Free Response Questions
Complete the attached FRQs. Make sure to provide complete answers and label all graphs completely.
FRQ #1: 2007 FRQ#2
FRQ #2: 2009 FRQ#2 form B
