Unit 4, Video 6 Summary

It is important to keep all graphs labeled clearly. The three graphs that need to be tied together are the money market graphs, loan-able funds graph and the AD-AS graphs. Changes in the money market affect all of the other graphs. Most of the debt the government owes is to the people, not foreign countries. If the government demand for money increases in our money market graph to work out of a deficit, our interest rates also increase. On our loan-able funds graph, this either decreases our supply of loan-able fund or increases our demand for funds, both mean the same in this case. An increase in government demand causes an increase in AD on the AD-AS graphs which causes the GDP and price level to increase.