Video Notes

Video One

There are three types of money in the money market. These three types of money are the commodity, representative, and the fiat money. In commodity money (cosidered the most primitive type of money), people are able to their trade goods with other goods. With representative money, the currency represents a specific quantity of metal (gold and silver). Finally fiat money is money that is only backed by the government's word.

Video Two

When you label a money market graph, you must have the acis correctly labeled. The y-axis is should always be labled "Interst rate", while the x-axis is labled "Price Quantity". Like always demand is downward sloping. The money supply should be vertical since it does not vary baed on the interest rate. Shifting the demand or supply will change the interest rate and price quantity accordingly. 

Video Three

THere are two main optionsfor the FED when it come to money supply, which is expansionary and contractionary. Expansionary is typically used during a recession while the later is enforced during an inflationary period. Th percent of cash that a bank need to store in "reserve" is known as the reserve requirement. In order for the FED to raise the money supply, they would need to lower the reserve requiremtent. Another tool the FED may use is the discount rate, which is the rate in which banks may borrow money from other banks. The final method used by the FED is the buying and selling of bonds. To increse the money supply the FED would buy bonds, but if they which to lower the money supply they would have to sell bonds.

Video Four

On the y-axis of the loanable funds markey graph is interest while the x-axis is quantity. Again the demanad is downward sloping, and the supply is upward sloping. The supply in a loanable funds market graph is dependent on savings. The more money saved by the banks, the more they can giveout as loans. 

Video Five

In order to determine the total cash created in a certain loan amount, you must determine the money multiplier (1/rrr). You then multiply the money multiplier with the loan amount which gives the total money created. This process is called the money creation process and states that banks create money by making loans. THis process assums that there is no excess reserve

Video Six 

The loanable funds, money market, and AD-AS mdel graphs all have a direct relationship with one another. This means a change in one will graph will affect the remaining two. An increase in interest rate will also increse the price leve This relationship is known as the Fisher effect.