Note: This is post #123 in a weekly video series on basic economics.
“If you think through all of the variables that shape a country’s economy, it’s no wonder that monetary policy is difficult,” says economist Alex Tabarrok. “It should also come as no surprise that the Federal Reserve doesn’t always get it right. In fact, sometimes the Fed’s actions have made the economy worse off.”
In this video by Marginal Revolution University, Tabarrok shows what happens when the Fed promotes heap credit in a way that fuels asset bubbles.
(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.