Note: This is post #119 in a weekly video series on basic economics.
The U.S. Federal Reserve controls the supply of money—which gives it a huge influence on the world economy. But as economist Tyler Cowen notes, how the Fed does this has changed since the Great Recession.
In this video by Marginal Revolution University, Cowen explains how the Fed can change the federal funds rate—the overnight interest rate for when banks lend money to each other—and how that influences aggregate demand.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Click here to see other videos in the Introduction to Economics series.