Video 1 - There are three types of money: commodity money, representative money, and fiat money. Commodity money is value within itself, representative money represents a value but has its drawback because of fluctuation, and fiat money has value because the government says so. Money also has three functions. It is a medium of exchange, it stores value, and it is a unit of account. However, people tend to assume that the more expensive an item is, the better the quality.
Video 2 - Money market graph has to be labeled correctly. The vertical axis is labeled as "i" which stands for interest rate. The horizontal axis is labeled as "Qm" which means quantity. Dm line or the demand line slopes down because when price is high quantity is low. The supply of money is vertical because it is fixed and does not vary due to interest rate.
Video 3 - The Fed has three tools of monetary policy. These are used in order to control money. Required reserve, abbreviated as RR is the percent of a bank's total deposit the bank holds onto. The discount rate is the rate at which banks can borrow money from the bank. Buying or selling bonds and securities is another tools of monetary policy. These also helps determine whether the economy is at a recession or an inflation. Recession is also known as expansionary or easy money, and inflation is also known as contractionary or tight money.
Video 4 - Loanable funds is money that is available in the banking system that the public can borrow. The vertical axis is labeled "i" which stands for interest rate. Horizontal axis is labeled as "Qlf" which stands for the quantity of Loanable funds. It's slope is downward sloping because when interest rate is lower people demand more money. The slope of supply or Loanable funds goes up because it comes from the amount of money that people have in banks meaning it's dependent on savings. People's incentives to save more equals increase in Loanable funds.
Video 5 - In this video about money creation process, banks create money by making loans. Being able to adjust the required reserve is very important. For example, if the RR given is 20% and the bank makes a new loan of $500, then the maximum money created by the banking system will be $2500. So, how do we calculate this? We take our money multiplier (1/RR) and multiply it with the $500.
Video 6 - Money market, Loanable funds, and AD-AS graph are interconnected with each other. We must remember to be careful when connecting each graph to each other and changing factors each time. Another thing to remember is that change in money means change in price. Increase in interest rate equals interest in the price level.
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