Why do governments create fiat currencies? Do they help promote an optimal amount of money? Explain.

Define price. Explain the price system that exists under barter and why it is problematic. How does the emergence of a money commodity from barter improve the market system?

Why do economists study the money supply? (Discuss the four reasons covered in class.)

Define: C, M1, M2, M3, and L. How are they related in terms of aggregation and in terms of liquidity?

Define liquidity. Rank the following assets in terms of liquidity, from most to least liquid: money market mutual fund, demand deposit, corporate stock, dollar bill, house, gold, checkable deposit.

How is income related to saving and investment?

Define the loanable funds market and the production possibilities frontier as discussed today in class. What happens to each if (for instance) an economy is characterized with many productive baby boomers entering retirement?

Why do financial markets exist? What are financial instruments? Explain financial markets role in providing risk sharing, liquidity, and increases in information. Why are risk sharing, liquidity, and information valued by savers and borrowers?

Do banks and other financial intermediaries like high interest rates? Why or why not?