This is so useful but i have a couple of questions. Basically if interest rates goes down wouldn't consumption then increase and cause savings to decrease? And then there is now an increase in national income which will then raise savings and them the whole cycle goes on in a sort of paradox??
No this doesn't happen actually, if interest rate goes down there will be increase in investment ,As investor have to pay less interest then. here investment increase in production sector leading to increase in output & hence increase in income.
Loanable funds is a wrong model. Endogenous money or bank credit money is more accurate, thus credit is an important part of aggregate demand, and actually no savings are lent out when you ask for a loan in a bank. If national product goes up, bank expectations go up, they lend out more, thus creating more money, thus reducing the interest rate of the market (but anyway, it is controlled by the central bank).
Thank you! always get the best interpretations from your channel
1:16 : shouldn't Aggregate Income be computed with net exports (X-M) too?
He assumed it is 0 for simplicity
Thank you so so so much! Among all educational videos this is by far THE BEST ONE!
This is so useful but i have a couple of questions. Basically if interest rates goes down wouldn't consumption then increase and cause savings to decrease? And then there is now an increase in national income which will then raise savings and them the whole cycle goes on in a sort of paradox??
No this doesn't happen actually, if interest rate goes down there will be increase in investment ,As investor have to pay less interest then. here investment increase in production sector leading to increase in output & hence increase in income.
Totally possible I think?
But he is an educator who is trying to allow anyone a world class education. This means quality control.
Loanable funds is a wrong model. Endogenous money or bank credit money is more accurate, thus credit is an important part of aggregate demand, and actually no savings are lent out when you ask for a loan in a bank. If national product goes up, bank expectations go up, they lend out more, thus creating more money, thus reducing the interest rate of the market (but anyway, it is controlled by the central bank).
THIS!!!^^^
did you need to align the ketnesian cross with the IS curve?
Does Endogenous Money refuse loanable funds view?
So very true!
its alll goood bro :)
He already has
finally! 1st!
it may be a typo... if it happened multiple times then you can cry foul
He's not an English teacher.
no need of such language on an educational video!