March 29th Video Response

Video #1:
     This video sought to teach us the basics of the money market. Commodities are basically goods that serve a purpose and representative money represents the quantity of precious metal and fiat money does not represent anything but the promise from the government that the money does have value. The functions of money include becoming a medium of exchange, which basically means it is through money that exchanges happen, money as a store of value and being a unit of account. (p > worth (quality)).

Video #2:
     Though there is a difference in labels, money market graphs are very similar to supply and demand graphs in their concepts. When the price is high, the demanded is high, when the interest rate is low, people have an incentive to borrow more. The supply of money is fixed and set by the FED, and it doesn't move unless the FED does so. When you increase demand, more pressure is put on interest rates. Quantity stays the same because supply is vertical, nothing can impact it. If they'd like to bring interest rates down, they'd have to increase money supply.

Video #3:
     The FED has two types of Monetary policy: Expansionary policy (easy money) and Contractionary policy (tight money). Under easy money, required reserves decrease in an effort to increase spending to battle recession and under tight money, required reserves increase in an effort to decrease spending to battle inflation. Discount rate isn't used very often as even if they have the incentive, it isn't guaranteed banks will comply and accept what is given. To expand the money supply, the FED buys bonds (expansionary), by doing this, money supply increases. The contract the money supply, the FED sells bonds (contractionary) and in turn reduces money supply. The Federal Funds rate i the rate at which banks borrow from one another.  

Video #4:
    Loanable funds is basically money that is available in banks for people to borrow. The loanable funds graph follows the basics of the previous graphs, but in this case, quantity stands for quantity of loanable funds and supply is upward sloping. Supply is dependent on savings As you increase demand in both the money market graph and loanable funds graph, interest rates increase. During a deficit, the government demands money in order to spend it.

Video #5:
     A key point in the money creation process is that banks create money by making loans. In a banking system, you'd multiply your excess reserves by your money multiplier. To get the money multiplier, you'd write it as 1/RR, 1 over the reserve ratio. An assumption of no excess reserves would reduce your total amount. To get the initial increase, you'd multiply the loan by the money multiplier.

Video #6:
     The equation of exchange follows the formula of MV=PQ, where M is the amount of money in the economy and V is the velocity of the money, it is stable and relates to the GDP expenditures. P is the average price of goods and Q serves as the total quantity or volume, this ties in with GDP income. A change in money will cause a change in price, just as the supply and demand graphs. Ultimately they are all related and with the shift of one side, the other will shift in response.