Students are expected to read & understand their book & class notes. Here is a checklist containing most of the topics you should have mastered:

Review sheet may not be completely up-to-date until 2 days before the exam!

Chapter 11: Money, Banking, and the Financial Sector

• Purpose of financial institutions
• Money: economist's definition
• Functions of Money: medium of exchange, unit of account, store of value
• Liquidity, Narrowly-Defined Money
• Measures of the Money Supply: M1, M2, M3
• Banks: Financial Intermediaries, Reserves, Assets, Liabilities
• Money Creation: Required Reserve Ratio, Required Reserve, Potential Money Multiplier (or the Potential Deposit Multiplier)
• Actual Money Multiplier (or the Actual Deposit Multiplier): Excess Reserves
• Multiple Deposit Creation: Changes in Total Reserves and Total Deposits from an Initial Change in Deposits
• Federal Funds Market and the Fed Funds Rate

Chapter 12: Monetary Policy and the FED

• Structure of the Federal Reserve System
• Functions of the Fed.
• Expansionary & contractionary policies
• Monetary tools.
  • OMOs
  • Discount Rate
  • Required Reserve Ratio
• Equation of Exchange (See Colander Ch 15, 352-4)
  • Velocity, nominal output & expenditures, real output
  • Classical assumptions and implications
  • Keynesian assumptions and implication

Chapter 14: Aggregate Demand Policy in Perspective

• Problems with Fiscal Policy
• Contractionary and Expansionary Policies
• Problems with Activist Policy
• Crowding Out
• Automatic Stabilizers and Discretionary Fiscal Policy

Chapter 15: Surpluses, Debts, & Deficits

• Dept, deficits, surpluses
• Structural & passive deficits
• real deficit
• Internal & external debt
• On-budget & off-budget expenditures
• Funding social security