Macro-Ch3-Financial Crisis and IS Interpretation

[@davidiredale9950]

I want you to know, that your videos are like a bright star in the night sky, guiding a group of students in Lithuania to passing their midterm. So from all of us, THANK YOU ❤️

[@KeyurCherry]

Thank you so much for making economics this much easier!!! Our professor is using the same slides as yours, so it made it even easier!!! once again thank you , love from Dhirubhai Ambani Institute of Information and Communication Technology, Gujarat, India❤

[@Noraht2511]

you are a life-saver

[@BeatriceDorso]

i am in love with you mr malloy

[@AjejeBrazorf330]

can we consider the I=S identity a simplification that do not take into account the role of banks? We do know that even if savings are low, firms can still access to Investment through bank loans... so why this I=S model is still taught in macroeconomics?

[@liammalloy]

Bank loans need to come from somewhere. That's why we put the IS model together with the LM curve to find the equilibrium. But also remember that we're in a closed economy at this point. In the real world, if I > S in the US, for example, those extra funds are coming from overseas.

[@AjejeBrazorf330]

@@liammalloy Thank you Professor, however it is still a bit unclear; Even if domestic investment exceeds domestic saving (I > S) in the US, commercial banks can still extend credit to borrowers without necessarily needing funds to come from overseas. Through fractional reserve banking, banks are able to create new money "out of nothing" by making loans. Or I am missing something?