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Monday, November 14, 2011-11-14 November Exam Study Guide: We ran out of time to review Chapter 11, so the exam will be primarily on Chapters 10, 12, and 16. Chapter 11 will be tested on the final exam in December. Please focus your review these next two nights on 10, 12, and 16. Know the following terms: inside lag monetarism monetary policy outside lag money multiplier formula federal funds rate prime rate discount rate open market operations money creation The Federal Reserve Act of 1913 The “Equation of Exchange” (when velocity goes up, what happens to price?) capital deepening aggregate supply gross national product price level recession peak savings technological progress nominal GDP leading indicators GDP per capita When banks use your money to help businesses expxand, what are they doing with your money? depreciation fiat money commodity money currency foreclosure member bank central bank representative money store of value money supply greenbacks demand deposits rubles Earnings on a Certificate of Deposit Year Principal amount Interest earned at 5% Principal at end of year 1 $100.00 $5.00 $105.00 2 $105.00 $5.25 $110.25 3 $110.25 $5.51 $115.76 4 $115.76 $5.79 $121.55 5 $121.55 $6.08 $127.63 6 $127.63 $6.38 $134.01 7 $134.01 $6.70 $140.71 8 $140.71 $7.04 $147.75 9 $147.75 $7.39 $155.14 10 $155.14 $7.76 $162.90 Redraw the above chart, but add a column for each category. Copy down the above figures in the first column, respectively, for each category. Then add 100 dollars each year as you calculate your principal at the end of the year. For example, At the end of year one, you would deposit another 100 dollars, so the principal at the end of the year would be $205 dollars. Figure the dollar amount of interest of that number, then add another 100 dollars so that at the end of year two, you would then have a total of (205 + 10.25 + 100 =) 315.25 dollars. Keep up that process for the ensuing years, record your numbers and compare year 10 on the left column ($162.90) with that of year 10 on the column that you have added to the right of that column.