I have to say the Fed's greatest power is that everyone believes it can affect the economy. The policies might take time, but just the news of the Fed's actions is immensely powerful. The thing is markets can react in the wrong ways. "Oh interest rates have gone down? That means the economy is bad!! SELL SELL SELL" instead of "Yay the Fed is supporting us, lets BUY BUY BUY".
Easy to miss, but in two spots when Professor Tabarrok mentions the adjustment back to the long-run growth rate, the animation shows movement down along the AD curve back toward the LRAS but on no SRAS curve. Even if we are to assume that inflation expectations adjusted and the SRAS shifted downward, despite not being shown, this would still be incorrect: given the kind of negative AD shock described in the video, the adjustment back to long run would involve the AD curve returning to its original position. After all, households can't cut back forever. This is a dynamic model, not a static one.
At 1:14: If people are spending less (ie saving more), wouldn't that mean there is more money in the banks to lend, allowing the banks to lend at lower rates, which would lead to an increase in lending by banks to entrepreneurs, allowing for "expansion" of their businesses? What am I misunderstanding here?
If the FED increases the quantity of money and as the video said there would be a higher growth rate, wouldn't that growth be coming from Nominal GDP and not Real GDP? And if so wouldn't that mean that there was no actual growth just perception of it due to prices rising?
In the short run an increase in the money supply does have an effect on real output, it is only in the long run that an increase in the money supply creates inflation.
Now suppose you’re a central banker in this economy and you want to neutralize this change in the economy. That is, you want to return the economy to its original state by pushing monetary policy in the opposite direction of the shock. If you do your job perfectly and the economy returns to its original state, what will the inflation rate be?
This is why I am a proponent of integrating transmitters in every unit of physical currency and digital footprints in digital money in conjunction with scanners so that every unit of currency can be tracked and scanned at every transaction in order to get a real-time view of the money supply and the velocity of money.
Sir, don't know you it is much better to have smart and (hopefully) well intentioned people make a mess of things than let normal people just vote with their daily choices?
I have to say the Fed's greatest power is that everyone believes it can affect the economy. The policies might take time, but just the news of the Fed's actions is immensely powerful. The thing is markets can react in the wrong ways. "Oh interest rates have gone down? That means the economy is bad!! SELL SELL SELL" instead of "Yay the Fed is supporting us, lets BUY BUY BUY".
Easy to miss, but in two spots when Professor Tabarrok mentions the adjustment back to the long-run growth rate, the animation shows movement down along the AD curve back toward the LRAS but on no SRAS curve. Even if we are to assume that inflation expectations adjusted and the SRAS shifted downward, despite not being shown, this would still be incorrect: given the kind of negative AD shock described in the video, the adjustment back to long run would involve the AD curve returning to its original position. After all, households can't cut back forever. This is a dynamic model, not a static one.
can u tell me what minute ?
Excellent Videos!!! Thank youuu !!
Who is watching this in 2020 during covid?
amazing videos
At 1:14: If people are spending less (ie saving more), wouldn't that mean there is more money in the banks to lend, allowing the banks to lend at lower rates, which would lead to an increase in lending by banks to entrepreneurs, allowing for "expansion" of their businesses? What am I misunderstanding here?
@@smashinbedrock4903 wdy mean "it will simply be offset with a lower intrest rate" ?
If the FED increases the quantity of money and as the video said there would be a higher growth rate, wouldn't that growth be coming from Nominal GDP and not Real GDP? And if so wouldn't that mean that there was no actual growth just perception of it due to prices rising?
In the short run an increase in the money supply does have an effect on real output, it is only in the long run that an increase in the money supply creates inflation.
Isn't the idea of variable lags on effects to monetary policy a myth, due to the expectations channel?
Now suppose you’re a central banker in this economy and you want to neutralize this change in the economy. That is, you want to return the economy to its original state by pushing monetary policy in the opposite direction of the shock. If you do your job perfectly and the economy returns to its original state, what will the inflation rate be?
This is why I am a proponent of integrating transmitters in every unit of physical currency and digital footprints in digital money in conjunction with scanners so that every unit of currency can be tracked and scanned at every transaction in order to get a real-time view of the money supply and the velocity of money.
End the Fed!
What a dumb ass!
Sir, don't know you it is much better to have smart and (hopefully) well intentioned people make a mess of things than let normal people just vote with their daily choices?