EXAM 3 OUTLINECh. 16 Monetary System1. Def. and Concepts.2. 3 Functions of Money3. Types of Money 4. What is M1 and M2? What are they composed of?5. The Structure of the Federal Reserve System6. The 3 Tools of the Fed. How do they work? How does the Fed use them?7. Types of Banking Systems8. How does a bank create money? (Money Multiplier)9. Monetary Problems (Worksheet)10. Financial Crisis 2008 - 2009Ch. 17 Money Growth and Inflation1. Def. and Concepts.2. Value of Money3. 2 sided Graph with the Value of Money and Price Level. Know how the graph works.4. How to calculate Relative Prices and what do they mean?5. How to calculate Real Wages and what do they mean?6. Real vs. Nominal Variables7. Classical Dichotomy and Money Neutrality8. Calculating the Velocity of Money.9. Quantity Equation. What does it say? How to use it?10. Costs of Inflation (Inflation Tax, Fisher Effect, Inflation Fallacy, Shoeleather Costs, Menu Costs, Relative Price Variability, Tax Distortions, Confusion and Inconvenience, Arbitrary Redistribution of Wealth)11. Calculating the after tax nominal and real interest rates.Ch. 18 The Open Economy1. Def. and Concepts.2. NX, Trade Balance, Trade Surplus, Trade Deficit3. What is NCO? What is a capital outlow? What is a capital inflow?4. Foreign Direct Investment vs. Foreign Portfolio Investment5. Factors that affect NX and NCO6. National Income and National Savings Identities for an Open Economy7. Calculations using the identities.8. Nominal Exchange Rates9. Exchange Rate Appreciation vs. Depreciation10. Calculating Real Exchange Rates and interpreting them11. Purchasing Power Parity (Know what it is and its limitations.)Ch. 19 Macroeconomics and the Open Economy1. Def. and Concepts2. The Markets for Loanable Funds, NCO, and Foreign Exchange for an Open Economy3. Know the Supply and Demand curves for each market and where they come from and why they slope up or down.4. Link the 3 markets together.5. What happens in the 3 markets when there is a change in National Savings, a Gov. Budget Deficit, a Tariff or Quota, or Capital