The aggregate demand-aggregate supply model, or AD-AS model, can help us understand business fluctuations. We’ll start exploring this model by focusing on the aggregate demand curve.

The aggregate demand curve shows us all of the possible combinations of...

Inflation can carry with it quite a few costs. But some governments, like Zimbabwe under President Robert Mugabe in the early 2000s, will go out of their to way to create inflation. Why?

Well, in the Zimbabwe example, the government printed the money and...

In the previous video, we learned that inflation can add noise to price signals resulting in some costly mistakes from price confusion and money illusion. Now, we’ll look at how it can interfere with long-term contracting with financial intermediaries....

The inflation rate can be somewhat volatile and unpredictable. For example, let’s take the period between 1964 and 1983 in the U.S. The inflation rate jumped around from 1.3% in 1964 to 5.9% in 1970, and all the way up to 14% in in 1980, before dipping...

In the last video, we learned the quantity theory of money and its corresponding identity equation: M x V = P x Y

For a quick refresher:

- M is the money supply.

- V is the velocity of money.

- P is the price level.

- And Y is the real GDP.

In this video...

The quantity theory of money is an important tool for thinking about issues in macroeconomics.

The equation for the quantity theory of money is: M x V = P x Y

What do the variables represent?

M is fairly straightforward – it’s the money supply in an...

Inflation is common in a modern economy. Shifts in supply and demand for goods and services cause prices to change accordingly. When the average level of prices rises, that’s inflation. It means that you’ll need more money to purchase the same stuff....

There’s an old analogy about blind men grasping an elephant.

Elephants are huge creatures. If you’re touching the trunk, but you can’t see the whole elephant, you’re going to have a very different perspective from someone touching a leg. It doesn’t mean...

The Austrian school of economic thought emphasizes market price signals and how they communicate decentralized information in an economy. The Austrian business cycle theory focuses on how central banks can distort those price signals.

When central banks...

So far in our business cycles deep dive, we’ve covered two of the four main theories: Keynesian and monetarist. Now, we’re going to move away from aggregate demand and monetary policy to check out the supply side of things in real business cycle (RBC)...