Video Notes

Though the woman's voice was a bit annoying and the man in the back kept interrupting, I learned a lot from the videos we had to watch. 

Unit 4 Part 1
There are 3 types of money. The first is called commodity money which has been in use the longest. These are goods who have other purposes but can still be used as money. The second type is called representative money. This means what ever is being used as currency is backed by something like gold of silver. The draw back of this is when the value of the metal changes, it affects the value of your currency. The third type is called fiat that we use today. It is not backed by metal. It is backed by the word of the government that it has value. There are also 3 functions of money. They are the fact that money is a medium of exchange, store of value, and unit of account. Also, price implies something's worth and quality.
Unit 4 Part 3
The money market graph has an x-axis labeled as quantity of money (QM) and the y-axis is labeled as interest rate. Demand for money (DM) slopes downward. The supply of money is vertical because it does not vary based on the interest rate. If the demand of money increases, it shifts right. To stabilize the interest rate when DM shifts, the FED can increase the supply of money. There are 2 ways to think about the money supply; terms of quantity or interest rates. A lot of what the FED does for monetary policy is stabilize interest rates. If interest rates are not stable, you cannot manipulate aggregate demand or predict the  level of investment and inter-sensitive consumer spending.
Unit 4 Part 4
The FEDs tools of monetary policy can be broken into two categories, expansion (easy money) and contractionary (tight money) policies. The  FED has control over reserve requirement, which is the percentage of total deposits the bank has to hang on to as vault cash or on reserve. The FED can lower this so that more money is available for banks (expansionary). If the FEDs wanted to contract the banks, they would increase reserve requirements (contractionary). The second thing the FEDs have control over is the discount rate which is the rate at which the banks can borrow money from the FEDs. If they borrow money, this is the interest rate they will be charged. If they want the banks to borrow money money, under the expansionary policy, they would lower the rates, and under the contractionary policy, they would increase the rates. This is an incentive for the banks to borrow money but it is not guarantee, therefore this is not used a lot. The third tool, which is most used is buying and selling bonds and security. Unlike the first two, to expand the money supply, the FEDs buy bonds (buy bonds=big bucks). If the FED wants to contract the money supply, they will sell the bonds. Federal open market committee (FOMC) is the piece in the FED that makes these decisions. Buying and selling bonds puts upward or downward pressure on the federal funds rate, which is the rate at which banks borrow from each other. When the Feds are buying bonds, it puts downward pressure on the federal funds rate, vise versa.
Unit 4 Part 7 
Another graph used in this unit is called loanable funds. The y axis is labeled as interest rate and the x axis is labeled as quantity of loanable funds (QLF). Again, demand of loanable funds (DLF) is downward sloping and supply of loanable funds (SLF) is sloping upward. SLF depends on savings. The more saved, the more banks have to loan. Two different ways to show what happens when the government runs a deficit are to one, increase the DLF and interest rates or decrease supply and increase in interest rates.
Unit 4 Part 8
The money creation process can be described as banks creating money by making loans. If the reserve requirements are 20% and the loan amount is $500 then to find the total money created you use use the money multiplier (1/RR) resulting in the (1/.2)=5x500=2500. This happens through the process of multiple deposit expansion. If you add up all the potential loans, that is where the $2500 comes into play though this is not guaranteed. Therefore in the problem, we assume there are no excess reserves. The potential total increase is the initial loan times the multiplier. If banks hold excess reserves then it will reduce the total. Multiple deposit expansion is the process of money being redeposited.
Unit 4 Part 9
To show a connection between money market, loanable funds, and AD-AS, you can draw each graph side by side. For example, if the government runs a deficit and borrows money, the demand for money will shift to the right and the interest rate will increase in the money market graph. To demonstrate this in the loanable funds graph, you can increase demand for loanable funds and interest rates increase (same as money market interest rate). In the AD-AS curve, AD shifts to the right. To explain this, MV=PQ or increase in interest rates cause an increase in price level. The fisher effect says that interest rate and price level must be equal (direct ratio).