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AP Macroeconomics 4.3 Definition Measurement and Functions of Money Questions

Use money's economic functions and monetary-aggregate definitions to classify assets and analyse how common transactions affect measured supply.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • match transaction and saving examples to money's medium, unit, and store functions
  • contrast monetary exchange with barter costs and the need for a double coincidence of wants
  • classify financial items and calculate the M1 and M2 monetary aggregates
  • separate currency in circulation and reserves from broader money-supply components
  • determine when deposits, withdrawals, and transfers alter an aggregate or only its composition

Covered syllabus points

MEA-3.C—a. Define money and its functions. b. Calculate (using data as appropriate) measures of money

Question 1

[Maximum number: 1]

The following is a simplified balance sheet for Mi Tierra Bank in the United States.

Mi Tierra Bank

Mi Tierra Bank

Assume that Luis withdraws $5,000 in cash from his checking account at Mi Tierra Bank.

What is the initial effect of the withdrawal on the M1 measure of money supply? Explain.

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