Monetary policy tools | Financial sector | AP Macroeconomics | Khan Academy
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- čas přidán 23. 08. 2024
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How central banks can use open market operations and reserve requirements to enact monetary policy to close output gaps. AP(R) Macroeconomics on Khan Academy: Macroeconomics is all about how an entire nationÕs performance is determined and improved over time. Learn how factors like unemployment, inflation, interest rates, economic growth and recession are caused and how they affect individuals and society as a whole. We hit the traditional topics from an AP Macroeconomics course, including basic economic concepts, economic indicators, and the business cycle, national income and price determination, the financial sector, the long-run consequences of stabilization policies, and international trade and finance. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything www.khanacadem....
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AP Macroeconomics on Khan Academy: Welcome to Economics! In this lesson we'll define Economic and introduce some of the fundamental tools and perspectives economists use to understand the world around us!
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Good luck for the exam tomorrow
Thanks man
Thanks
Thanks
How'd the exam go? (for whoever took it)
thanks it’s in 7 hrs
This guy literally teaches every subjects ! and teaches them very well! I survived my calc class with his videos and now the same guy is saving me from Macroeconomics!
I'm just curious; how'd the rest of your macroeconomics class go?
May God grant you many years to live,
thank you so much I gained a lot.
I don't know what I would do without Khan Academy. Thank you so much!!!
This recent series is very interesting. Learning a lot, thanks.
If there is a thing that made me dumb is selling and buying bonds about who is getting the money and who is giving ... Not knowing the relationship is inverse, if the FED sells a bond it means they are getting money from circulation, if they buy a bond it means they are injecting money into circulation.
Great video. Easy understanding for learners.
One thing I want to know is that quantity of money which equals to M1 ( Cash+Demand deposits) & MS curve represents M2 (M1 + Time Deposits). Thank you.
Monetary policy tools are very important. If they are not effective, the government will be in debt or will be closed :0
Hi! Thanks for an useful lesson. May I ask what can make monetary policy less effectivenesss?
Just a major concept of money supply. Two major tools monetary policy and fiscal policy..(He has a video on this.)
Thanks so much.
Thank you, it’s clearly explaining ever!
These videos are helping me understand CFA topics I was struggling with. Thank you!!
Thank you so much !!!
About the multiplier: doesnt this assume that banks always lend all the money they possibly can? But what if the banks don't find enough credit-worthy borrowers?
You're right. The money multiplier is an oversimplification but highlights the "maximum" effect in an idealized economy where a) every dollar is lent out by banks and b) all the money stays in the banking system (borrowing money and buying bitcoin means those don't become deposits in a bank downstream).
Monetary policy tools? More like "With Khan Academy, you can't loose!" Thanks again for everything.
Very general. You should add, that first, real life money multiplier is never equal to formula values, secondly ECB and other European banks as well as other banks in the world frequently use discount rate, lombard loans rate, repo rates and overnight facilities to target inflation rather then trade on open market. Also many people with no economy education are super confused by what this words, that when central bank buys out the government bond, they just add digits to bank account...You should know its not exactly like that. Tell about Central Banks active / passive operations (just like any other normal banks). Tell about REPO auctions and take as example some european country with no EU currency or Asian economy, or Canada. Tell about Central Banks gold / currency reserves around the world. Because like this people have another 200 valuable questions.
Your Chanel is excellent by the way your voice reminds me a little bit of Thomas Sowell.
Anyway would you sir be willing to do a video explaining Scotish social credit? It would be awesome if you could.
You have got a new subscriber
Awesome..going over old stuff to utilize the brain.. lol.
Monetary policy is determining or controlling the cost to obtain credit.
Using the tools provided to it, the Fed controls the cost to obtain credit. They do not control the money supply but do influence it. Most of the money supply is bank credit and controlling the cost to obtain that credit influences the supply of it. Monetary policy does not control, in any way, the net supply of government liabilities.
Banks have two accounts with the Fed, a securities account and a reserve account. Moving a sum of government liabilities from a bank's securities account to the bank's reserve account is not printing money or increasing the overall supply. It is simply changing the form of the government's liability. Monetary policy is not the creation or destruction of money, that's fiscal policy.
Securities can only be purchased with reserves. Converting those securities back to reserves is not money creation. The creation of reserves only occurs through fiscal policy.
Lower rates incentivizes borrowing. Higher interest rates increase costs (inflation) and disincentivize borrowing. The cost of credit is reflected in the cost of all goods and services. So, increasing the cost to obtain credit will, of course, results in inflation.
What we have are minimum reserve ratio requirements. Not fractional reserve banking. We haven't had fractional reserve banking for over a century. We do not have a "multiplier effect" because banks are not financial intermediaries and do not lend reserves or deposits. Banks only lend monetized bank credit.
This video is nothing more than a prime example of an ecenomic theology that disregards reality for the sake of orthodoxy consistency.
great video ! i need your help , im looking for information about the money targeting and inflation targeting. i searched on goggle but didn’t find a easily explanation . thanks
What happens when those bonds mature? Money ends up back in the economy and causes inflation again?
Inflation happens no matter what; it just depends on how much. Certain times there is more, others there is less.
It's a great video, Thanks
Thanks for sharing!!!
Do you have a video on the balanced budget multiplier?
Thanks a Lot 💙
great video
why would govt want to reduce the supply of currency can any body explain me it?
Hey thanks for the video, nice visuals. 6:17 could have been implied with some arrows.
Awesome. First😁
Thanks a lot professor. I have a question and I would be ecstatic if you clarify me.
Is interest rate the same with discount rate ? I mean who determines it banks or Central Bank(FED)?
For example, from my understanding if there is a high inflation in economy , fed increase discount rate in order to decrease money supply (because they want to target interest rate by banks over loans) in economy and in that case banks increase interest rate (precautions against people who want to get deposit back) for attracting depositors which all of these has an negative impact on increasing prices.
I know I'm not the man himself, but I can do my best to help:
First, let's make sure we're clear on this: the DISCOUNT rate is the interest rate that the Fed charges on loans to banks. The FEDERAL FUNDS rate is the interest rate set by the Fed for banks to borrow excess reserves from each other overnight. Bank operations are not always perfect, and sometimes banks end up with less than the required amount of reserves. Therefore, they need to borrow from other banks who have a lot of excess reserves. The interest rate that the lending bank charges the borrowing bank is the FEDERAL FUNDS rate.
The Fed sets the discount rate, and sets a TARGET federal funds rate, or the general rate that banks will charge each other for lending excess reserves.
In general, the Fed keeps the DISCOUNT rate (the rate for the Fed loaning to banks) in line with the FEDERAL FUNDS rate (the rate for banks loaning to banks). Affecting the DISCOUNT rate is more of an emergency situation. Consider the recession in 2008: there were high default rates, meaning people weren't paying back their mortgage loans. Banks did not want to loan any more money because they were afraid that people wouldn't pay them back. This caused a big decrease in the supply of money, because new checkable deposits were not being created. Less money in the economy caused less consumer spending and investment spending, and GDP fell. There was a recession. During this emergency, the Fed brought the default rate down dramatically, so the cost of borrowing money from the Fed decreased. The hope was that the banks would borrow more money and be willing to loan money again, therefore increasing the supply of money.
So, I hope that example helped you see that the DISCOUNT rate is not what people are generally talking about when they're talking about the interest rate, but that it is used more in emergency situations when the Fed wants banks to borrow more money from it. Usually, the discount rate is kept in line with the general level of interest rates in the economy. When people talk about "the" interest rate, they talk about the federal funds rate, or the rate that banks charge each other for lending excess reserves to each other. The Fed can't actually set that one, they can only do things to influence it, like the things described in the video.
I hope this was helpful and not confusing!
@@drakebott582 well , basically fed sets Federal fund rate am I right? So Fed sets higher and lower of federal fund rate so banks could borrow or loan each other between those rates yes?
8:48 Happening now…. Taming inflation in Canada, interest rates +400 basis points in 9 months!
what is the name of the application in which they draw?pls help
Staite Biig I would love to know too very convenient
Isn't it like that, that when the government increases the money supply, people would demand more and thus there will be an increase in prices and interest rate. So why when the government increases the money supplied, the interest rates fall`?
there will be some time lags between increase in supply of money thus resulting in fall in interest rate.. people will demand more money and get the money after that interest rate will increase..before the increase in interest rate there will be a good amount of money being borrowed..this amount can be used to invest somewhere else..if you have read the definition of demand then you can understand that a demand is not just a desire to get something but a willingness to get the good that he will definitely buy that good at particular prices...and you can read shift in the demand reasons in your book
You're smart
If the FED decided they wanted to maximize their balance sheet, aka increasing the number of assets that they possess (profits re invested or just deposited into the treasury to lower taxes), all they would have to do is raise the reserve requirement and make up the difference of what would have been the natural increase of supply just by printing...
Why aren't they doing that?
You would want to do that so you could lower taxes but still pay off the 20 trillion in debt
Adjusting reserve requirements has a very powerful effect on held reserves, much more than other tools. i.e. raising it from 5% to 6% increases reserves by 20%. That's why CBs are reluctant to alter it.
Sir how do you write on screen
Microsoft windows has a tool for writing on your screen.
Why the money is inelastic?
i think it's only ideally inelastic, which means that the amount of a currency is determined by the central bank of the country, but in the real world i guess fake money goes into circulation, and maybe some money disappears but that's less likely :)
Models smooth out complexities to show trends
Wrong on fed buying treasuries direct...the primary market participants (banks) purchase them...taking money away from private sector, and the the fed buys those bonds off the banks and increases their the banks, (primary market buyers) reserves at the fed....equals less money for lending at private sector within the banks (unless banks draw on fed reserves)...whilst supposedly more money in existence.
Thanks for the correction
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Good content but I kind of only get 20% of it :(
Bitcoin.