Macroeconomics Unit IV: Blog Video Summary

VIDEO SUMMARIES

1. The most primitive type of money to what we use today is commodity money, representative money, and fiat money. People are most familiar with money being a medium of exchange. When money is stored, it is expected to be stable. The longer money is kept in the bank, they less it is worth during inflation. 
2. The price that is paid for money to get it is the interest rate that is incurred when money is borrowed. Demand for money is downward sloping because when the price is high, the quantity demanded is low and vice versa. When the interest rate is low, people have an incentive to borrow more. When the Federal government offers a tax credit to first time home buyers they are increasing the demand for money because more people will borrow from them.
3. An expansionary policy is called "easy" money while a contractionary money policy is called "tight" money. The Fed controls the reserve requirement either as vault cash pr on reserve with a Fed branch. If the Fed wants to increase the money supply, they decrease the reserve requirement, which increases excess reserves. Buying bonds increases money supply.
4. The video goes through a loanable funds market and money market. During a government deficit, the government demands money and the money market graph will show a shift to the right, showing an increase in interest rate. On the loanable funds market graph, there would be an increased demand for loanable funds due to borrowing. Must show that an increase in money demanded is an increase in interest rate, and an increase in demand for loanable funds increases interest rate.
5. Banks create money buy making loans. The money multiplier is found by one divided by reserve requirement. To find total money created, it would be excess reserves multiplied by the money multiplier. The video shows examples on how to find total money created. 
6. Government deficit spending is when the government borrows money from the public. Buying a bond is loaning money to the government, which is like an IOU. The video goes through the labels on each axis and how the money market, loanable funds market, and AD/AS graphs work in various situations. The Fisher Effect is when the interest rate and inflation must be equivalent to one another.