ECON 202 - PRINCIPLES OF ECONOMICS:

MACROECONOMICS
Phil Martinez

EXAM 3 STUDY GUIDE
MONETARY THEORY

MONEY AND BANKING


SHORT ANSWER ESSAY QUESTIONS

1.        Explain how the private banking system creates money.

2.        Explain the (3) limitations to the banking system creating money.

3.        What is the money multiplier? How does it work?

4.        In what ways is the Federal Reserve Bank a quasi-governmental, private bank.

5.        Explain why the Fed. has been considering raising interest rates over the last year.            What is the Fed. trying to achieve?

8.        Explain the Keynesian proposal for monetary policy.

9.        Explain the Monetarist proposal for monetary policy.

10.      Compare the Keynesian and Monetarist proposals for monetary.

11.      What policy does the Fed. currently use? Explain why.