Macro 2017 FRQ #2- Money Market, Bond Prices, Open Market Operations

Jacob Clifford explains a macroeconomics free response question from the 2017 AP test, focusing on the money market, interest rates, bond prices, and the velocity of money. He discusses the inverse relationship between interest rates and bond prices, the impact of interest rates on price levels and GDP, and how the central bank can use open market operations to influence interest rates.

What is the quantity theory of money and how does it relate to nominal GDP?

What are the implications of a constant money supply when GDP is increasing?

Describe the open market operations that the central bank can use to influence interest rates.