So I suppose I found the next to be popular channel in the coming years. Thanks TH-cam algorithm! And All the best to creator behind this. I never got the gust of this concept although I had an A+ in economics. Thanks to you, it now makes sense
I'm so glad I took your class. I had to withdraw because my math skills are just too rusty. Haven't used them in about 20 years. I'll be back after I brush off the rust, so to speak. But I want to scream from the hilltops that everyone needs to learn what is taught in ECON 1500. I was just talking to my wife that I wish an ECON 0900 was taught and made a requirement for college students. A class that just teaches the simple concepts of economics. Knowing about supply and demand curves would improve people's lives. And, of course, knowing how GDP is calculated.
@@MarketPowerYT That's nice to hear. However, my doubt is high, considering the class size. I was very bummed out when I had to withdraw. Your class was my favorite to attend this semester.
What happens to gdp when the government creates currency instead of borrowing? Lets say for example that the government prints billions of dollars to pay for a war, it probably wont cause the monetary crowding out of private investment or consumption, but it will cause the crowding out of real resources, even if the economy has "slack", excess capacity and/or idle resources. In ww2 the gdp of the us grew massively, but it was mostly government spending on weapons of war while private consumption fell, the metal that was used to build tanks and ships could have been used to make other things, factories that produced bullets couldnt be effortlessly shifted into producing consumer goods, workers had to leave the factories to fight the war and less productive women and elderly had to take their place, there was not enough food for everybody so they enacted rations, etc. This grew gdp but didnt make the standards of living better, you could make the argument that if the us had not gone into ww2 we would be in a much worse place but that is not something you can measure. The central bank can also try to "stimulate" the economy by artificially lowering interest rates, it will cause both investment and consumption to go up quickly, since creditors will be less eager to save and debtors will be more eager to borrow than they would otherwise be, this may cause price inflation and affect the real gdp but price inflation can take a lot of time to occur, in the short run you will have an illusion of growth of the real gdp (boom) while in the long run the prices will start to ajust, the fed is gonna have to increase rates in order to contain the price inflation which may lead to a recession if the economy is overleveraged(bust). If you are only looking at the nominal or real gdp you might reach the false conclusion that we only need to spend more currency to get the economy spinning again but that will just cause another cycle
The point that GDP is more complicated than just adding those components is fine, but using a model that assumes full employment in order to say that government spending cannot increase GDP is, in my opinion, pretty extreme policy misdirection. More often than not, when people want the government to spend more in order to increase GDP, the reason they want this to happen is *because* we are *not* at full employment.
The effect of the fiscal stimulus is a tug-of-war between crowd out and multiplier effects. There are plenty of (credible) studies that show a dollar of government spending, even in recessions, is less than a dollar of increase in GDP. Even the studies on the New Deal, a point where America was as far from full employment as we have ever been, show that government spending had crowd out effects. Of course, there are good studies that also show that a dollar of government spending can create more than a dollar of GDP. It's an active debate, and I might address it more in a future video.
if the pumpink is on the us soil its that it has be imported here at some point so its already count in importation. underground economy is usualy estimated and add to gdp. no empiric data prove that governement spending shrink investment most of time if it is well spending it increase it actually
great video, but I'm starting to hate the fact that I am a financial engineer and most things people don't understand or find confusing have become intuitive and easy to me
They kinda do in the sense that part of consumption and investments goes to imports, instead of what is produced in the country. If it makes it easier to see, you can write it as Y+M=C+I+G+X
Hey! At 11:52 you said that all the money in savings from which government borrows is coming from decreased consumption by public but does the government actually borrow from private individuals thereby squeezing their consumption out? Isn't government borrowings actually coming largely from new money created by Federal Reserve instead of savings of individuals? Hence isn't government spending boosting gdp while keeping money in pockets of individuals to spend as they like? (I understand inflation is like the side effect of whole government deficit stuff but how is consumption decreased by government deficit)
Great question! In the short run, you can finance spending by printing money and get slightly higher GDP growth. But, like you said, in the long run you would get inflation and the growth rate would fall back. So government spending, in these models, has no effect on long-run growth.
@MarketPowerYT Doesn't it also depend a lot on what does the government do with the deficit. If the government spends money in building infrastructure by taking deficit like in China and India won't it boost gdp growth in both long and short run (as long as the projects are necessary and not vanity projects) ?
@@hetanshthakore5886 Yeah, you're citing things like what I said at the end of that segment. While it's possible for the government to do that, you also have to consider that the cost of public funds is usually higher than the cost of private funds. So the efficiency gains have to be pretty high to get a net positive. But it's possible!
Actually the loanable funds theory does not work in the modern economy that does not base its currency on a gold standard. The interest rate of borrowing in a fiat currency for a government, no matter how large the amount, would not raise the interest rate level for the private sector. To use the Federal Reserve Bank, the central bank of the US, also known as the fed, as an example, the fed nowadays control the overnight interest rate in a target range set by the fed itself by paying interest to the reserve balances the banks held at the fed. It would not be affected by market forces. The loanable funds theory is commonly taught as a classical model but its assumptions do not match with reality of the modern economy today.
But this equation does NOT explain why America only has to produce very LITTLE but can consume ENORMOUS amounts of goods by simply printing dollars that other poorer countries have no choice but to accept.
@@aashahafa the strawmanned version is that supply creates its own demand which is obviously false, but Jean Baptist Say never said that. The "real" one is that in order for you to demand something first you need to have created the supply of something else, since demand is defined as not only the desire to buy something but also the actual purchasing power to buy it. Lets imagine three scenarios: In the first one we have Robinson Crusoe alone in a desert island, he is hungry and wants to eat a coconut, first he needs to produce a coconut before he can consume it, it doesnt matter how hungry he is, the production and supply need to come before the consumption. In the second one lets say that crusoe finds Friday also stuck in the same island and Friday wants to trade some fish in Exchange for some of Crusoe's coconuts. In order to effectivelly demand the coconuts from Crusoe he not only needs the desire to buy coconuts, but he also needs to first produce a supply of fish (the purchasing power) to buy the coconuts, unless Crusoe is a generous person he wont give the coconuts to Friday, he first needs to produce or promise to produce and exchange his fish with him in the future, in other words, supply preceds demand. The last one is in a money or indirect exchange economy where in order to buy something you need money and in order to get money first you need to produce the supply of a product or service to another person, even if you are getting credit from a bank, the money that the bank lends you is money that was saved by another person and they had to produce something in order to be able to save that money. The only exceptions to this would be if you stole the money or if the FED created currency and then gave it to the bank, even then the person who you stole from needed to have produced something in order to get that money and the currency only has purchasing power if you have a supply of something to buy.
@aashahafa the strawmanned version is that supply creates its own demand which is obviously false, but Jean Baptist Say never said that. The "real" one is that in order for you to demand something first you need to have created the supply of something else, since demand is defined as not only the desire to buy something but also the actual purchasing power to buy it. Lets imagine three scenarios: In the first one we have Robinson Crusoe alone in a desert island, he is hungry and wants to eat a coconut, first he needs to produce a coconut before he can consume it, it doesnt matter how hungry he is, the production and supply need to come before the consumption. In the second one lets say that crusoe finds Friday also stuck in the same island and Friday wants to trade some fish in Exchange for some of Crusoe's coconuts. In order to effectivelly demand the coconuts from Crusoe he not only needs the desire to buy coconuts, but he also needs to first produce a supply of fish (the purchasing power) to buy the coconuts, unless Crusoe is a generous person he wont give the coconuts to Friday, he first needs to produce or promise to produce and exchange his fish with him in the future, in other words, supply preceds demand. The last one is in a money or indirect exchange economy where in order to buy something you need money and in order to get money first you need to produce the supply of a product or service to another person, even if you are getting credit from a bank, the money that the bank lends you is money that was saved by another person and they had to produce something in order to be able to save that money. The only exceptions to this would be if you stole the money or if the FED created currency and then gave it to the bank, even then the person who you stole from needed to have produced something in order to get that money and the currency only has purchasing power if you have a supply of something to buy.
You cited the bible but it is way easier to believe money has value even if, in the end, it's only paper or digital currency, and save it for the future than to believe that God will provide for our necessities and consider our circunstances. It's way easier to believe that the world will end than to believe a society without money like heaven. edit: then to than.
This has become required watching for all friends and family members. I'm sending it to everyone.
I'm a freshman in college studying economics thank you for the videos they really help me out!!
I literally have an Intro to Econ final in 6 days. TALK ABOUT TIMING! Love from across the pacific here in Singapore ❤
So I suppose I found the next to be popular channel in the coming years. Thanks TH-cam algorithm!
And All the best to creator behind this. I never got the gust of this concept although I had an A+ in economics. Thanks to you, it now makes sense
This is such an underrated channel. Love these videos as an economics student❤
I'm so glad I took your class. I had to withdraw because my math skills are just too rusty. Haven't used them in about 20 years. I'll be back after I brush off the rust, so to speak. But I want to scream from the hilltops that everyone needs to learn what is taught in ECON 1500. I was just talking to my wife that I wish an ECON 0900 was taught and made a requirement for college students. A class that just teaches the simple concepts of economics. Knowing about supply and demand curves would improve people's lives. And, of course, knowing how GDP is calculated.
We've missed you!
@@MarketPowerYT That's nice to hear. However, my doubt is high, considering the class size. I was very bummed out when I had to withdraw. Your class was my favorite to attend this semester.
Such a nice video, not too complicated examples and hopefully give a good idea of what economics is to others
What happens to gdp when the government creates currency instead of borrowing? Lets say for example that the government prints billions of dollars to pay for a war, it probably wont cause the monetary crowding out of private investment or consumption, but it will cause the crowding out of real resources, even if the economy has "slack", excess capacity and/or idle resources. In ww2 the gdp of the us grew massively, but it was mostly government spending on weapons of war while private consumption fell, the metal that was used to build tanks and ships could have been used to make other things, factories that produced bullets couldnt be effortlessly shifted into producing consumer goods, workers had to leave the factories to fight the war and less productive women and elderly had to take their place, there was not enough food for everybody so they enacted rations, etc. This grew gdp but didnt make the standards of living better, you could make the argument that if the us had not gone into ww2 we would be in a much worse place but that is not something you can measure. The central bank can also try to "stimulate" the economy by artificially lowering interest rates, it will cause both investment and consumption to go up quickly, since creditors will be less eager to save and debtors will be more eager to borrow than they would otherwise be, this may cause price inflation and affect the real gdp but price inflation can take a lot of time to occur, in the short run you will have an illusion of growth of the real gdp (boom) while in the long run the prices will start to ajust, the fed is gonna have to increase rates in order to contain the price inflation which may lead to a recession if the economy is overleveraged(bust). If you are only looking at the nominal or real gdp you might reach the false conclusion that we only need to spend more currency to get the economy spinning again but that will just cause another cycle
Love ur videos!!
great video, very helpful, thanks
Great video ! Thank you
Thank you sir
That's the aggregate demand formula.
The point that GDP is more complicated than just adding those components is fine, but using a model that assumes full employment in order to say that government spending cannot increase GDP is, in my opinion, pretty extreme policy misdirection. More often than not, when people want the government to spend more in order to increase GDP, the reason they want this to happen is *because* we are *not* at full employment.
The effect of the fiscal stimulus is a tug-of-war between crowd out and multiplier effects. There are plenty of (credible) studies that show a dollar of government spending, even in recessions, is less than a dollar of increase in GDP. Even the studies on the New Deal, a point where America was as far from full employment as we have ever been, show that government spending had crowd out effects. Of course, there are good studies that also show that a dollar of government spending can create more than a dollar of GDP. It's an active debate, and I might address it more in a future video.
Great video, but you gotta fix the food that you are eating. Those cans are problems waiting to happen
if the pumpink is on the us soil its that it has be imported here at some point so its already count in importation. underground economy is usualy estimated and add to gdp. no empiric data prove that governement spending shrink investment most of time if it is well spending it increase it actually
great video, but I'm starting to hate the fact that I am a financial engineer and most things people don't understand or find confusing have become intuitive and easy to me
Economics is like that cheat code that lets you see inside the Matrix.
IMPORTS do not subtract from GDP
They kinda do in the sense that part of consumption and investments goes to imports, instead of what is produced in the country.
If it makes it easier to see, you can write it as Y+M=C+I+G+X
Did you use manim for animations?
Yes
Hey! At 11:52 you said that all the money in savings from which government borrows is coming from decreased consumption by public but does the government actually borrow from private individuals thereby squeezing their consumption out?
Isn't government borrowings actually coming largely from new money created by Federal Reserve instead of savings of individuals?
Hence isn't government spending boosting gdp while keeping money in pockets of individuals to spend as they like?
(I understand inflation is like the side effect of whole government deficit stuff but how is consumption decreased by government deficit)
Great question! In the short run, you can finance spending by printing money and get slightly higher GDP growth. But, like you said, in the long run you would get inflation and the growth rate would fall back. So government spending, in these models, has no effect on long-run growth.
@MarketPowerYT Doesn't it also depend a lot on what does the government do with the deficit.
If the government spends money in building infrastructure by taking deficit like in China and India won't it boost gdp growth in both long and short run (as long as the projects are necessary and not vanity projects) ?
@@hetanshthakore5886 Yeah, you're citing things like what I said at the end of that segment. While it's possible for the government to do that, you also have to consider that the cost of public funds is usually higher than the cost of private funds. So the efficiency gains have to be pretty high to get a net positive. But it's possible!
Actually the loanable funds theory does not work in the modern economy that does not base its currency on a gold standard. The interest rate of borrowing in a fiat currency for a government, no matter how large the amount, would not raise the interest rate level for the private sector. To use the Federal Reserve Bank, the central bank of the US, also known as the fed, as an example, the fed nowadays control the overnight interest rate in a target range set by the fed itself by paying interest to the reserve balances the banks held at the fed. It would not be affected by market forces. The loanable funds theory is commonly taught as a classical model but its assumptions do not match with reality of the modern economy today.
But this equation does NOT explain why America only has to produce very LITTLE but can consume ENORMOUS amounts of goods by simply printing dollars that other poorer countries have no choice but to accept.
Great video and the animations were really helpful. The content is pretty crisp as well. Can you do a video on economists like Acemoglu and his work
I did this video on the Nobel prize. But I wouldn't be surprised if his work gets worked into a future video.
th-cam.com/video/9GYUD2sPbsM/w-d-xo.html
y'all are stuck believing in Say's Law
Are you talking about the strawmanned version of Say's law made by keynesians or the real one?
Are you talking about the strawmanned version of Say's law made by keynesians or the real one?
@@rafaelflores448 idk. can you explain the real one?
@@aashahafa the strawmanned version is that supply creates its own demand which is obviously false, but Jean Baptist Say never said that.
The "real" one is that in order for you to demand something first you need to have created the supply of something else, since demand is defined as not only the desire to buy something but also the actual purchasing power to buy it. Lets imagine three scenarios:
In the first one we have Robinson Crusoe alone in a desert island, he is hungry and wants to eat a coconut, first he needs to produce a coconut before he can consume it, it doesnt matter how hungry he is, the production and supply need to come before the consumption.
In the second one lets say that crusoe finds Friday also stuck in the same island and Friday wants to trade some fish in Exchange for some of Crusoe's coconuts. In order to effectivelly demand the coconuts from Crusoe he not only needs the desire to buy coconuts, but he also needs to first produce a supply of fish (the purchasing power) to buy the coconuts, unless Crusoe is a generous person he wont give the coconuts to Friday, he first needs to produce or promise to produce and exchange his fish with him in the future, in other words, supply preceds demand.
The last one is in a money or indirect exchange economy where in order to buy something you need money and in order to get money first you need to produce the supply of a product or service to another person, even if you are getting credit from a bank, the money that the bank lends you is money that was saved by another person and they had to produce something in order to be able to save that money. The only exceptions to this would be if you stole the money or if the FED created currency and then gave it to the bank, even then the person who you stole from needed to have produced something in order to get that money and the currency only has purchasing power if you have a supply of something to buy.
@aashahafa the strawmanned version is that supply creates its own demand which is obviously false, but Jean Baptist Say never said that.
The "real" one is that in order for you to demand something first you need to have created the supply of something else, since demand is defined as not only the desire to buy something but also the actual purchasing power to buy it. Lets imagine three scenarios:
In the first one we have Robinson Crusoe alone in a desert island, he is hungry and wants to eat a coconut, first he needs to produce a coconut before he can consume it, it doesnt matter how hungry he is, the production and supply need to come before the consumption.
In the second one lets say that crusoe finds Friday also stuck in the same island and Friday wants to trade some fish in Exchange for some of Crusoe's coconuts. In order to effectivelly demand the coconuts from Crusoe he not only needs the desire to buy coconuts, but he also needs to first produce a supply of fish (the purchasing power) to buy the coconuts, unless Crusoe is a generous person he wont give the coconuts to Friday, he first needs to produce or promise to produce and exchange his fish with him in the future, in other words, supply preceds demand.
The last one is in a money or indirect exchange economy where in order to buy something you need money and in order to get money first you need to produce the supply of a product or service to another person, even if you are getting credit from a bank, the money that the bank lends you is money that was saved by another person and they had to produce something in order to be able to save that money. The only exceptions to this would be if you stole the money or if the FED created currency and then gave it to the bank, even then the person who you stole from needed to have produced something in order to get that money and the currency only has purchasing power if you have a supply of something to buy.
You cited the bible but it is way easier to believe money has value even if, in the end, it's only paper or digital currency, and save it for the future than to believe that God will provide for our necessities and consider our circunstances. It's way easier to believe that the world will end than to believe a society without money like heaven.
edit: then to than.
average econ student problems