I didn’t know the name of the teacher, so I call her
Ms. Mason because her sweatshirt says Mason.
Part 1
In AP Macroeconomics Unit 4 Part 1, Ms. Mason explains
the three types of money and three functions of money. Camera man tries to
lighten the mood by comparing the trios to A Christmas Story, but Ms. Mason
doesn’t want any of it. The three types of money include commodity money (goods
that function as currency), representative money (currency being valued by
precious metals), and fiat money (when the government determines the value of
money). The functions of money include money as a medium of exchange (exchanges
through money), money as a store value (the expectation of stored money to
retain its value), and money as a unit of account (price implies a goods
worth).
Part 3
In AP Macroeconomics Unit 4 Part 3, Ms. Mason explains
how to draw money market graphs. She implores the viewers to label our both the
x and y axis with quantity of money representing quantity and interest rate
representing price respectively. For money market graphs, the demand of money
is downward sloping due to the law of demand. The supply of money is vertical
because money is a fixed value set by the Fed. Increasing the DM increases the
interest rate and to decrease that interest rate, the Fed has to increase the
money supply.
Part 4
In AP Macroeconomics Unit 4 Part 4, Ms. Mason talks
about the three tools of monetary policy. The tools include the reserve
requirement, the discount rate, and federal open market operations. The tools
are used as expansionary or contractionary policies depending on whether they
are increased or decreased. She then explains the federal funds rate which will
increase or decrease if the Fed buys or sells bonds and securities.
Part 7
In AP Macroeconomics Unit 4 Part 7, Ms. Mason teaches
us how to graph loanable funds and tie that graph into money market graphs to
show the results in AD/AS. Loanable funds graphs are basic AD/AS graphs with
different labels. These graphs are used to show what happens when the government
runs a deficit. The two ways Ms. Mason shows it is by decreasing the DM (demand
of money) on the money market graph, matching the interest rate with the
loanable fund graph, and either also increasing the DLF (demand of loanable
funds) or decreasing the SLF (supply of loanable funds) stating that it makes
more sense to show the DLF increase.
Part 8
In AP Macroeconomics Unit 4 Part 8, Ms. Mason
describes the money creation process with an example. She sets the reserve
requirement to 20%, with Bob putting a deposit of $500 into the bank. From
there, she found the money multiplier by dividing one by the reserve ratio.
Then she multiplied the money multiplier of 5 by the deposit to get the total
amount of money created. She then explains how 500 becomes $2500 along with
some keywords to look out for in money creation problems.
Part 9
In AP Macroeconomics Unit 4 Part 9, Ms. Mason explains
how to tie money market graphs into loanable funds graphs into AD/AS graphs.
She said something I found interesting which went along the lines of “The vast
majority of US debt is owed to its people.” Basically when the money market DM
shifts to the right, the interest rate increases which carries over to the
loanable funds graph. On the loanable funds graph, the DLF increases increasing
the interest rate which carries over to the AD/AS graph where AD shifts right
increasing the price level and GDP. These graphs directly relate to the
equation of exchange, MV = PQ, which ties into the fisher effect which states
that the change in interest rate will equal the change in price level. In
macroeconomics, everything is connected.
