Blog Assignment - 3/29/2015

Video One: http://www.youtube.com/watch?
v=YLsrkvHo_HA&feature=results_video&playnext=1&list=PL2CB281D126F65E26
     There are three types of money: commodity money, representative money, and fiat money. Commodity money is a good that serves as money, but can also serve another purpose, like cows. Representative money represents a quantity of precious metal. Fiat money, however, doesn't represent anything, excepts for the government's promise that the currency has value. There are three functions of money: as a medium of exchange, as a store of value, and as a unit of account.

Video Two: http://www.youtube.com/watch?v=gzFdeM6lUno&feature=bf_prev&list=PL2CB281D126F65E26&lf=results_video
     Just like any other supply and demand graph that has a price, the money market graph also needs a price. The price that you pay for money is the interest rate, which is denoted by a lowercase i that will label the y-axis. The horizontal graph will be labeled as the quantity of money (QM). In the money market graph, the demand for money (DM) is downward sloping, because the quantity of money demanded is low when the price is high. The supply of money (SM), however, is vertical, because it does not vary based on the interest rate.

Video Three: http://www.youtube.com/watch?v=XJFrPI8lLzQ&feature=bf_next&list=PL2CB281D126F65E26&lf=results_video
     The Fed has three tools of monetary policy, two of which are expansionary policy and contractionary policy. The expansionary policy is also known as easy money, and the contractionary policy is also known as tight money. The first thing the Fed can change using these policies is the reserve requirement, which is the percentage of the bank's total deposits that they must hang on to, either as vault cash or on reserves at a Fed branch. Using an expansionary policy, the Fed will decrease the reserve requirement, but will increase it using the contractionary policy.

Video Four: http://www.youtube.com/watch?v=rdM44CC0ELY&feature=bf_next&list=PL2CB281D126F65E26&lf=results_video
     Loanable funds is money that is available in the banking system for people to borrow. The loanable funds graph will have price (as the interest rate) marking the vertical axis, and quantity of loanable funds marking the horizontal axis. The demand for loanable funds slopes downwards and the supply of loanable funds slopes upwards. The supply of loanable funds comes from the amount of money that people have in banks, which means that it is dependent on savings. The more money people saves means more money that the bank has to make loans. 

Video Five: http://www.youtube.com/watch?v=1tUC59pz95I&feature=bf_next&list=PL2CB281D126F65E26&lf=results_video
     Banks create money by making loans. The formula for the money multiplier is one divided by your RR, or your reserve ratio.