Summary We examine how an increase in money supply without a corresponding increase in the amount of goods/services can lead to inflation. We then look at the real historical example of Europe from 1500-1600 and the causes of the “price revolution” at that time. Videos to watch before None needed
Summary A short example illustrates how having a common currency makes trading goods in an economy more efficient by making it a simpler to find someone to exchange goods with. Videos to watch before None needed
Summary An examination of how the Gold Standard kept price levels in check. An increased/decreased price level in one country was countered by a flow of gold out of/into the country through the trade imbalance mechanism. This offsetting flow of gold would neutralize the change in the price level. Videos to watch before What restrictions did the Gold Standard impose on member countries? Does an increasing money supply always cause inflation?
Summary A look at what macro economic factors make Gold attractive to hold. We look at the relationship between real interest rates and Gold prices and point out how other currencies in the world looking unattractive makes Gold look attractive. Transcript In this video we take a look at how gold competes with other currencies and look at what factors make holding gold relatively more or less attractive compared to other currencies in the world. Setting up the example Similar to our previous video, we are going to assume that there are only three currencies in the world: the US dollar, gold and rest of the world (ROW) currencies. If you watched our previous videos you know that the reason
Summary We look at a simple example that shows how the Gold Standard and therefore by definition, fixed exchange rates, made trading between countries more convenient by eliminating any risk of exchange rate changes. Videos to watch before What restrictions did the Gold Standard impose on member countries?
Summary This video talks about a disadvantage of the Gold Standard. Specifically we discuss how economic shocks in one country can be transmitted quickly across the world because of the fixed exchange rate mechanism that is synonymous with the gold standard. We look at what is likely to happen if there was a terrorist attack in one country on the Gold Standard, and see that its entirely possible that a country would have to increase interest rates in reaction to such an event. Videos to watch before What restrictions did the Gold Standard impose on member countries?