- In the first video the lady explains the three types of money. These being; commodity money, representative money, and fiscal money. Further on she expounds on the functions of money. Money can be a medium of exchange, store of value, and unit of account (worth).
Video 2
- During the second video the lady makes clear the money market, with the different components that we must know. Interest rate goes in the y-axis, and quantity of money in the x-axis. The supply of money is fixed by the Fed, thus does not vary according on interest rate. If the interest rate are unstable aggregate demand cannot be predicted.
Video 3
- The lady now goes into detail with what the Fed does to increase money supply (expansionary/easy money) and decrease money supply (contractionary/tight money). The Fed haas 3 options, they can maneuver to obtain their goal. Change the requirer reserves, discount rate, or in OMO (Buy or sell bonds, Open Markets Operations). Reducing or increasing the requirer reserves and discount rate are incentives for the banks to react to the the change, and does not guarantee a change in the money supply. Unlike the other two OMO put pressure to change to federal funds rate.
Video 4
- In this next video the lady describes how the loanable fund market is labeled and how is it connected to the money market. Identical to the money market the interest rate goes to the y-axis and quantity goes to the x-axis, but converted to loanable funds. The supply of loanable funds in this case is upward slopping depending on savings for banks to be able to loan out. The demand for more increase demand of loans thus increasing the interest rate, but i can as well decrease the supply of loanable funds.
Video 5
- During the course of this ride the lady explains how money is created through banks. The key concepts is to know that money is created by making loans. We use the money multiplier (1/RR) to know the maximum money supply created. This is because of the multiple deposit system, as one deposits to a bank they take the money to make more loan and others as well take it and deposit it into another bank. This is all in presumption that banks do not keep more that the require reservers.
Video 6
- In the last video the lady puts in view how the money market, loanable funds market, and the AD & AS graph connect. As the demand of money increases or decreases in the money market the latest rate will change, this follows to the loanable funds market. Using the fisher effect saying how interest rate and price level are in equilibrium this changes the AD & AS graph. In consequence alternating the GDP.
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