Unit 4 Video Responses

 Part 1- Money Market Basic Concepts 

Unit 4 part 1 went over the three types of money and also the three functions of money. The three types of money are commodity money, (goods that have other purposes and can be used as money) representative money, (whatever you're using as currency it represents quantity of silver) and fiat money. (money that is worth value because government says so.) Fiat money is the type of money we use today. The three functions of money are medium of exchange, (money that is exchanged for something else) store of value, (expect money to be stable when you save it) and unit of account. (looking at the price and implying its worth) 

Part 3- Money Market Graphs

Unit 4 part 2 talked about the basics of money market graphs and how to manipulate them. This specific graph in the video is very similar to Unit 1 graph, so if demand of money increases it shifts to the right and vise versa. When the interest rate is high on the graph, the quantity demanded is low. When the interest rate is low, the quantity demanded is high. 

Part 4- The Fed: Tools of Money Policy

Unit 4 part 4 discussed how Expansionary policy and Contractionary policy effect the money supply. When the Fed wants to "expand" the money supply, they would decrease their required reserves, lower the discount rate, and buy bonds. If the Fed wants to "contract" the money supply, they would increase their required reserves, increase the discount rate, and sell bonds. Buying bonds gives more money to the public and selling bonds gives more money to the Fed. 

Part 7- Loanable Funds Graph

Unit 4 part 7 went over on how to use the Loanable Funds Graph. It has similar qualities with the Money Market Graph, except the demand slope is labeled as "Demand Loanable Funds" and the supply line is slopping upward. If the government is on a deficit, it would shift the demand slope to the right because the government is demanding more money, which would also increase the demand for loanable funds. You can draw the Money Market Graph and Loanable Funds Graph side by side in order to double check if you're manipulating the graph correctly. 

Part 8- Money Creation Process

Unit 4 part 8 went in depth of how the money creation process works. They used an example of a loan of five hundred dollars, a reserve requirement of twenty percent and a question of what would be the total amount of money created from this loan. You would take the money multiplier equation (1 over required reserve) and multiply that result by five hundred; giving you the total amount of twenty-five hundred dollars. This amount is not always guaranteed; it is only guaranteed in the circumstances of the bank holding no excess reserves. 

Part 9- Relating Money Market, Loanable Funds Market, and AD-AS

Unit 4 part 9 explains how to tie in the Money Market, Loanable Funds Market, and AD-AS graph to the AP exam. The problem example they used is government deficit. When the government is in deficit, it increases the demand of money in Money Market and Loanable Funds Market; also increasing aggregate demand in the AD-AS graph. It is recommended to show an increase in demand on the Loanable Funds Market because it shows a consistent increase in interest rate.