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?

The Credit Crunch of 2007?

The Economist discusses the strains on the banking industry resulting from the subprime mortgage mess.

“NOT only is there no God,” said Woody Allen, “but try getting a plumber on weekends.” That just about sums up the problems of today's financial markets. The plumbing is badly blocked, and nobody seems able to fix it, not even the central banks, the market's immortals.

The problem is the apparent reluctance of banks to lend to each other, particularly over three months. That problem arises, in part, from uncertainty about who will pay the bill for America's subprime-mortgage collapse. But it also results from the need for banks to protect their own balance-sheets in the face of some unexpected claims on their capital.

Read the full article here.

What is money? Explain the four definitions of money discussed in class.

What makes a dollar bill money? What makes a personal check money? What factors, if changed, would affect your willingness to accept a dollar bill or a check as money?

What is barter? Explain the double coincidence of wants problem that exists in barter.

Explain the six stages of money's evolution. What is the relationship between use and exchange value as money evolves?

Define: commodity money, commodity standard, and fiat money.

What are the "money-ish" qualities of gold and silver?

Explain how the modern banking developed during the time of the goldsmith bankers. Why would some goldsmith bankers engage in fraud?

Why might a $20 Federal Reserve Note be more desirable as a form of money than a $20 gold coin from the point of view of an individual? How about from the point of view of the government?

Define seigniorage. How can it be increased?

Explain the U-shaped cost of exchange curve.