Video 1: Types and Functions of Money
3 types of money
- · Commodity – goods that act as money
- · Representative – coins and dollars
- · Flat money – government’s word
3 main functions
- · Medium of exchange
- · Storage of value
- · Unit of account
Video 2: Money Market Graphs
Money supply
- · Constant, controlled by the interest rates and government.
- · Vertical, not based off of interest rates
- · Increase demand = increase interest rates
The law of demand – if the price is high quantity demanded
is low, if price is low quantity demanded is high
Video 3: The Fed’s tools of monetary policy
The gov’t uses two options regarding changes in the money
supply
- · Contractionary (tight money)
- · Expansionary (easy money)
Contractionary fiscal policy
- · Reserve rate will ↑
- · Discount rate will ↑
- · Gov’t will sell bonds and securities
Expansionary fiscal policy
- · Reserve rate will ↓
- · Discount rate will ↓
- · Gov’t will buy bonds and securities
Video 4: The Loanable funds Market
Loadable funds graph
- · Supply curve is completely dependent on saving
- · If more people save, then more loans are available
- · If gov’t is in a deficit then demand for loans will increase, which leads to a decrease in supply of loans
Video 5: Money creation and multiple deposit expansion
Money is created when banks make loans
To find how much money a loan creates you must:
- · Find the multiplier – (1/RR)
- · Multiply by the loan amount = multiple deposit expansion
Example
·
RR = 20%
·
(1/.2)=5
·
5(500) = 2500
Video 6: Relating Money market,
loanable funds market, AD/AS model
Exchange – MV = PQ
·
Increase in demand for money increases price level
·
Increase in demand for money increases interest rate, which causes
the demand curve to increase resulting in the price levels to increase as well
as GDPr in AD/AS graphs
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