03/26/2016      UNIT IV: Youtube Videos on Monetary Policy 

https://m.youtube.com/watch?v=YLsrkvHo_HA&feature=results_video&list=PL2CB281D126F65E26&playnext=1

Video 1: I never knew money had as many purposeful functions as it does from buying, to saving, to judging what an item is actually worth. I also feel that there is so much to learn about the concept of money from commodity to representative. Representative through me for a small loop in understanding as it is sort of money that functions as a certain quantity in coin value. While commodity simply means a good that has other purposes while also functioning as money.

https://m.youtube.com/watch?list=PL2CB281D126F65E26&params=OAFIAVgC&v=gzFdeM6lUno&mode=NORMAL

Video 2: This video explored the concept of money market graphs. The vertical axis is the price, as price you pay to get money. The horizontal axis is the quantity money. I found it interesting that Demand will slope down due to a high price - low quantity demand relationship.

https://m.youtube.com/watch?list=PL2CB281D126F65E26&lf=results_video&v=XJFrPI8lLzQ&feature=bf_next

Video 3:  The tools explored in this video was on the FED and manipulation of money supply. Expansionary is used to battle a recession and also known as easy money. Contractionary is used to battle inflation and is also known as hard type money. All falling under when the FED engages in open market operations, you get the FOMC, or the Federal Open Market Committee, who is the piece of the FED entity that makes those decisions.

https://m.youtube.com/watch?lf=results_video&feature=bf_next&v=rdM44CC0ELY&list=PL2CB281D126F65E26

Video 4: This video gave thorough details of the Equation of Exchange, which is MV=PQ.
M = money supply, V = velocity.  (MV) = GDP. Q= total quantity in volume of goods. (PQ)= GDP income where who is eating money changes in M, will impact prices, and changing M if price is stable will effect the quantity.

https://m.youtube.com/watch?feature=bf_next&list=PL2CB281D126F65E26&lf=results_video&v=1tUC59pz95I

Video 5: This video talks about the circulation of money through loans. More or less dealing with how banks create money by offering loans with interest. The formula for the money multiplier is 1/ RR (Reserved Requirements). Then through multiple deposit expansion loans increase .

https://m.youtube.com/watch?list=PL2CB281D126F65E26&params=OAFIAVgI&v=k37Y6BKcpsY&mode=NORMAL

Video 6: This video describes Loanable Funds as well as ties together all of the videos for one final understanding. I found the Fisher Effect the most interesting as it states MV and PQ must be set equal. This sort of declares a 1:1 direct ratio. The increase in the interest rate, ties into the increase in price level, goes back to the Fisher Effect, ties into the equation of exchange, and there you have it .... The key to the connection between all concepts in unit 4.

02/ 28/ 16    Fiscal Policy

There are two types of economics:

Classical:-Competition is a good thing.

                  -The invisible hand (means market will fix itself no government needed.)

                  -In the long run, the economy will balance at full employment. 

                  -Trickle down effect (help the rich first and everybody else second.)

                  -The economy is always close to or at full employment. 

Keynesian:  -Competition is not beneficial

                     -AD is the key to saving an economy.

                     -Saving money causes recessions.

                     -Ratchets effects & sticky wages blocked Say's Law.

                     -In the Long Run, we are all dead. 

Two tools of Fiscal Policy: -Taxes, in which the government can increase or decrease

                                             -Spending, in which the government can increase or decrease 

Policy Two Options: -Discretionary Fiscal Policy (action) 

                                   -Expansionary fiscal policy (think deficit)

                                   -Contractionary fiscal policy (think surplus)

                                   -Non-Discretionary Fiscal Policy (no action) 

View this video for a visual and descriptive view of the differences between stablizers: 

http://study.com/academy/lesson/automatic-stabilizers-in-economics-definition-examples.html

02/22/16        Consumption vs. Savings

Here's a brief video with a very interesting way to cath on to the idea of Consumtion vs Savings.

https://www.youtube.com/watch?v=vj7XExwChwI

Heres the formulas: 

02/18/16             Aggregate Supply:

• The level of Real GDP (GDPr) that firms will produce at Price Level (PL)

Short Run- Level of GDPr  which is directly related to the price level.

                 - where input prices are sticky and do not adjust to the price level

Long Run- input prices are flexible, and adjust to changes in price level

                 -GDPr independent of price level

     

         

02/12/16      UNIT 3: Aggregate Demand vs. Supply

Aggregate Demand Curve (AD)

- AD is the demand by consumers, government, and foreign countries.

-What definitely doesn't shift the curve? Changes in price level.

*Formula for AD*

Reason for downward slope of AD curve:

1.) Real-Balance Effect:

• Higher price levels reduce the purchasing power of money.
• Lower price levels increase purchasing power and increase expenditures.
• This decreases the quantity of expenditures.

2.) Interest-Rate Effect:

• When the price level increases, lenders need to charge higher interest rates to get a REAL return on their loans. 
• Higher interest rates discourage consumer spending and business investment. 

3.) Foreign Trade Effect: 

• When U.S. price level rises, foreign buyers purchase fewer  U.S.> goods and Americans buy more foreign goods. 
• Exports fall and imports rise, causing real GDP demanded to fall. (Xn decreasing) 

Full Employment: - where AD intersects LRAS & SRAS at the same point.

Recessionary Gap: -when equilibrium occurs below full employment output.

Inflationary Gap: - when equilibrium occurs beyond full employment output.

• More wealth = more spending (AD shifts ->)
• Less wealth = less spending (AD shifts <- )

Consumer Expectations

• Positive expectations = more spending (AD shifts ->)
• Negative expectations = less spending (AD shifts <-) 

Household indebtedness

• Less debt = more spending (AD shifts ->)
• More debt = less spending (AD shifts <- )

Taxes

• Less taxes = more spending (AD shifts ->)
• More taxes = less spending (AD shifts <- )

Gross Private Investment: 
Investment Spending is sensitive to:
The Real Interest Rate

• Lower Real Interest Rate = More Investment (AD ->)
• Higher Real Interest Rate = Less Investment (AD <- )

Expected Returns

• Higher Expected Returns = More Investment (AD ->)
• Lower Expected Returns = Less Investment (AD <- )
• Expected Returns are influenced by:

           - Expectations of future profitability
           - Technology
           - Degree of Excess Capacity (Existing Stock of Capital)
           - Business Taxes

Government Spending: 

• More Government Spending (AD ->)
• Less Government Spending (AD <- )

Net Exports:
Net Exports are sensitive to: 
Exchange Rates (International value of $)

• Strong $ = More imports & Fewer Exports = (AD <- )
• Weak  $ = Fewer Imports & More Exports = (AD ->)

Relative Income

• Strong Foreign Economics = More Exports = (AD ->)
• Weak Foreign Economics = Less Exports = (AD <- )