The business cycle | Aggregate demand and aggregate supply | Macroeconomics | Khan Academy

[@MationGaming]

Ok so not only does this guy help me pass my ap biology and calculus tests, but HE CAN HELP ME WITH COLLEGE ECONOMICS NOW???? WHAT A GOD!

[@dustinharford8454]

Ate my dinner to this instead of reading the textbook; the result? 70% on the midterm! Your handwriting is wonderful by the way. Thanks a million!

[@boraulu8900]

tomorrow i have a macroeconomics exam and now i'm exactly doing what you have done 1 year ago. i hope i will get a result as high as yours. khan academy never gets old!!!

[@oceditz7850]

@@boraulu8900 tomorrow I have business economics exam me too done exactly the same thing which you two had done years ago... Wish me luck P.S: I'm not very good at studies even so wish me luck to atleast pass my exam 🤞

[@musak.4068]

@@boraulu8900 how's life

[@boraulu8900]

@@musak.4068 i have done very well in the exam. Wish you all the best guys. Thank you very much! Khan Academy never gets old!!!

[@musak.4068]

@@boraulu8900 Great! I took a break from trading after a big loss and have been studying khan academy for the past several months.

[@Charl3011]

If you're my lecturer I would have gone to lecture every single day

[@nthperson]

The problem with this presentation is that GDP is not really a measurement of economic growth, only the amount being spent by all players in an economy. This includes all government spending, whether the revenue is raised via taxation, via borrowing in the credit markets or by monetary expansion orchestrated by the central bank. The most important externality is not "human emotion." Rather, the most important variable is systemic: the structure of property law and taxation that (as explained by Joseph Stiglitz) triggers "rent-seeking" (e.g., land and resource speculation) over the production of goods and delivery of value-adding services. A much more insightful explanation of business cycles is provided in the March 2015 issue of the American Journal of Economics and Sociology. Papers by Professors Fred Foldvary (San Jose State) and Mason Gaffney (emeritus, University of California) are of particular value because these two professors accurately forecasted the 2008 financial and economic crisis.

[@tatetalk888]

When your teacher cant teach 4 sh-t so you gotta watch this..... Mr.H

[@2007Club]

L.A. boy98 HAHAHAHhahahaha😭😭😭😭

[@TOMMYGUN1023]

You are a great teacher and have brought my attention back to want to learn. I have ADD so I can't focus on a book but you make it easy with the videos. I wish they had this when I went to school. lol

[@mohemmedansari8664]

:-) when your neighbor looses his job is recession, and when you loose, its depression. I like humor even in serious lesson.

[@wardamalik9341]

Best explanation on every topic....Thank u soo much

[@MrArkiholic]

this is awesome!! really helpful and easy to understand.. great presentation!!

[@emahenecia4660]

Finally something went inside my head( I got it at last)

[@pvpchampion9004]

Tysm :)

[@LCB_Instituto]

Yup, seven years later, still great. Thanks!

[@economicsportal]

Nice way to deliver the concept. Keep it up

[@amiraboodi2075]

Very interesting ❤

[@jakobthekid]

Where does AD and AS come into play?

[@economicsportal]

good effort

[@udeshmerfi9925]

Thank a lot ❤

[@jamie_gz]

The way you explained the business cycle is much more interesting and practical than my professor! COOL!

[@jessieprado6778]

great vid helped me out lots for my test!!!

[@annika4209]

Thanks a lot for the video! Can anyone recommend papers or textbooks to read up on the influence of human emotions on the business cycles?

[@jordangauthier2674]

Human emotion really only lengthens or shortens the different periods of the "cycle." Emotion may influence the longevity of the period preceding the boom, during the boom, during the bust, and following the bust. It can fuel higher highs and lower lows in the prices of assets, but it is not the cause of the boom-bust cycle (aka the Business Cycle or Trade Cycle), and not the only factor influencing each period's length. Bubbles are an effect of the cause of business cycles, and are perhaps the most visible, observable effect. Unfortunately, I do not have any papers or textbooks on the influence of human emotions on the business cycles as from the vantage point of the Austrian School of Economics, emotion plays a minor role and again is an effect not a cause of the cycle. However, behavioral economics is attempting to apply psychology and sociology to economics in order to go beyond the stationary economy that Keynesian theory and mathematical formulas can only describe (at least cleanly), so you could look there. However, I advocate for the sound theory developed by the Austrian School (Mises and Hayek); though, you may be disappointed to find that the theory discounts human emotions as they are not the, or a, primary cause.

[@jazouliabdelmoughit7765]

Good explanation, although it is not the only one. there are few other theories of business cycles that are worthy of interest. I would like to see an explanation of the Austrian theory, Monetary or even Marxist..

[@Tyrant_13]

Has Sal ever given his opinion of Austrian economics?

[@iantobrewer3896]

brilliantly explained

[@omgiheartpie]

Salman Khan was a hedge fund analyst. I'd venture to say what you perceive to be his economic philosophy is something he has arrived to logically and can authoritatively back up.

[@zakirhasanbora9044]

This was really really good In fact, the factor of human emotions actually made the concept easier

[@lungdupak5978]

Real business cycle please

[@instaminox]

Excellent explanation

[@domagojgrcevic6055]

What acctually causes points of return? When we are in a recession, how does acctually expansion start and vice verca? Good vid, thanks ahead!!

[@nthperson]

As I am sure you are aware, there is even among economists great concern over the reliance on GDP as a measurement of real economic growth. And, more to the point, GDP growth tells us nothing about changes in the distribution of income or wealth in a society, or other factors that contribute to a stable society.

[@kiranamutiarakusakanusa3054]

Thanl you thank you thank youuuuu

[@Amphibianman94]

FiatTubing, you shouldn't downgrade Sal's credibility. From this video alone I can say that he would probably be very interested in the works of Mises, Hayek, Friedman, etc. The Austrian economists offer a lot to the study, and there's nothing more satisfying than a "new" knowledge on old problems. Mr. Khan, I would surely like to recommend any of the major works by the three economists/thinkers mentioned above.

[@chueyadanarlinn6796]

Hope you are my eco teacher :')

[@Countcho]

Human emotions? But isn't the "human emotions" (to some degree) influenced by the interest rates (which can be manipulated by the central bank) on indicators of whether to make investments or not?

[@aliosama936]

Thank you

[@theSpicyHam]

Very helpful

[@mitchellboldin9472]

Real GDP is actually going to increase exponentially over time. However, economists often graph the natural log of GDP, which is indeed a straight line as you have graphed. But you may want to make that clear in the video.

[@manishasinha1458]

I have a question regarding real business cycle. HOW CAN YOU EXPLAIN THEORITICALLY DIFFERENT PART OF BUISNESS CYCLE USING A CLASSICAL MODEL? Could you please explain this?

[@EraserFS]

One can argue that these "emotions" or "animal spirits" (as Keynes called the same, just to point out which economic school is taught on this channel) are simply the result of a centralized economy. Or to be more specific that centrally set incentives for all economic agents result into aggregate motion in the same direction (either towards expansion or contraction), if these centrally set incentives are successful to some degree. This is because in principle the bankruptcy of particular economic agent is the opportunity of a more efficient other agent, because the more efficient is enabled to acquire liquidated resources and / or market shares of the bankrupt agent. From a theoretical standpoint these motions into a different direction cancel each other out, so from the aggregate perspective, the whole problem is that this mechanism doesnt work there resulting into an aggregate motion in one direction, which one can call forced expansion.

[@Doodsome]

Respect. Now if you could apply all the theory you're giving to the current economic situation and make it more relevant, you'll get an explosion with the amount of subscribers. Ppl need to know these thing to realize what is happening right now.

[@blazemk]

yes you are completely right. What is said in this video is wrong. "A recession is a period of 2 consequtive quarters of negative growth." A depression on the other hand is just like a recession but much more severe . Like the great depression of 1929. The recession of 2008-2010 can also be called a depresion because of the severity of it.

[@vanskiid]

@khanacademy could you give advice to a college kid on how to work at a hedge fund?

[@tiki2188]

These are great, you explain econ well and are quite fair. Very non ideological. Glad you did mention human emotions (human action??) because an economy is not really a thing, but just us, all of us. There is history, stats, graphs and charts and they DO help but can't view economics as purely mathematical. Khan Academy are you ever gunna touch on the Austrian School? I know its controversial and even ridiculed but since the late 80s I think they have some relevancy

[@bombito8863]

thanks bro

[@nthperson]

Are you familiar with the Genuine Progress Indicator developed by Redefining Progress? Although far from perfect, the GPI is a much more useful tool for evaluation of public policy choices. Even if one is focused just on economic growth I would rather rely on net growth in the stock of capital goods.

[@martinverbeek8862]

Fed fund rate/inter bank lending rate cycles corolates almost perfect and is obviously the reason for the business cycle

[@carlosortegap]

What about the rest of the world? They have economies too

[@creeper52enderman]

Fed rates have made recessions more common, they aren't the driving force behind the business cycle though.

[@martinverbeek8862]

Carlos. 62% of global assets are US dollar mate

[@xcvsdxvsx]

i hope emotion is codewords for central bank interest rate manipulation.

[@seller6478]

THANKYOU SO MUCH

[@247troller]

Trough > expansion > peak > contraction

[@liyuehashbrowns6055]

8:45 Life really is a roller coaster

[@LaShakaa]

very well explained. thanks :)

[@philliphlavac]

What program are you using to write and draw with on your computer?

[@jessnz]

+Phillip Hlavac A bit late but it is Smoothdraw

[@fpromothraj]

Can a industry cycle go from Decline to growth stage? if so are there any examples of such industry.

[@johnw7018]

This is good!!!!!!!!!!!!!!

[@rohanchandra9647]

woah 10 yearsss

[@jernellelouis3432]

Best explanation ever!!!

[@VickiBee]

My friend, the one I used to try to impress, likes Paul Krugman and Bernie Sanders. He has no problem saying so. But he also likes Bill Gates in terms of business people.

[@carlosortegap]

How is that a contradiction?

[@exkalina]

can someone explain pls what is the difference between business cycles, economic cycles and financial cycles?

[@nthperson]

The real point of constructing the GPI was (and is) to bring to light the shortcomings of measurements long embraced by the economics profession. Similar quality of life measurements have crept their way into the research and writings of environmental economists. The problem is mainstream models is that they arbitrarily treat nature as a produced (i.e., capital) good, rather than the source of goods, capital and consumer.

[@CRoy-qu7ib]

capital is the source of capital.

[@nthperson]

@@CRoy-qu7ib I disagree. Labor, applied to natural resources, is the source of capital (if, by capital, one is referring to tangible goods). The dynamics are confused by using the term "capital" to refer to nontangible financial assets, which are claims on capital goods and on other tangible assets, such as land and natural resources. Nonfinancial assets are also exchanged for other nonfinancial assets.

[@emahenecia4660]

Is there any solution for recession?

[@blownspeakersss]

Ema Henecia During recessions, the general goal is to increase aggregate demand. So, usually you see a cut in taxes, which leaves consumers with more disposable income (useable money), or an increase in governmental spending (this pushes more money through the economy as well, driving aggregate demand upward). The central bank can take several measures as well that don't require political action.

[@EraserFS]

+Ema Henecia One can argue that recessions are the solution to a previous problem. Clusters of malinvestments that need to be liquidated in order to make effective use of the means of production possible again. The preferred solution is to put more money into people hands in order to shorten the period of time in which this "solution" can unfold. Thus we see phenomena that the public calls "too big to fail" or "excessive risk taking". Its the perfect but unwanted result from the preferred solution.

[@BrokTheLoneWolf]

Ema Henecia all breathing needs a breathing out aspect.

[@jordangauthier2674]

Simply, don't manipulate the money supply, especially in the form of fiduciary media

[@MrPheeww]

Day trading is not 'working' ?

[@WangYangX]

It looks like a relationship.

[@nthperson]

Let's begin with the very use of GDP as a measurement. Is it a measurement of the health of the economy? Well, not really, because GDP increases with every dollar spent by government at all levels -- whether the revenue is acquired via taxation, by actual borrowing from others in credit markets or by issuance of debt in exchange for currency balances created by the Fed out of thin air. (more to follow)

[@bunnyflavored7462]

KHANN!!!! KHANNN!!!

[@damiaxxx]

The Austrian economists explain the business cycle much more completely.

[@rickyssidekick5535]

....omg, his voice tho ///0.0///

[@himanshusingh-er7dd]

Emotionics or economics

[@blazemk]

A depression is a more severe recession. But recession is still 2 consequtive quarters of negative growth therefore the term recession in the video is wrong. It should be called a slowdown or a contraction. Source of my information is "Essentials of Economics by John Sloman"

[@Profmak78]

As someone who teaches aspects of economic theory to college students, I find this lesson very distressing. It strongly suggests that emotion is the primary driver of investment decisions. This is deeply misleading, and it obscures key drivers of the business cycle, especially the effect of the upward the distribution of profits. It has been well-understood for at least a century that the pooling of profits undercuts aggregate demand (we can call this the paradox of thrift, or whatever). Even Henry Ford clearly understood this. Emotions cannot account for the business cycle.

[@hadezmage]

Well, you are entitled to your opinion, as is Khan Academy and its representatives. For the most part, these series of videos are designed to be watched in succession -- the instructor has repeatedly said before, after, and in this video, that he is an avid supporter of human emotion as a defining factor. And this is all theory, opinion, he always says, "I think.." or "I believe..." or something along those lines. A lot of the people watching this video, students, know that economics is wholeheartedly made up of complex theories based off of simplified observations. Most people here are just to gain information to pass classes, and will quickly forget the majority of information they learned after the fact. On a side note, I'll have to side with this video's opinion that emotion is a factor and very much does account for the business cycle, as someone who had studied sociology, psychology, and the alike, though I do not have enough information to say whether or not it is the primary, main, or strongest one. Of course, traditional ideas and theories conveyed though conventional methods such as textbooks, unless modernized, will never be able to accurately portray a changing society, as it tends to forget that economy is not alone, there is a domino effect that includes politics and society, in regard to economics. (The former two which are highly fueled by strong human emotion, almost irrefutable, I'd say.) Humans can act sporadically, and no economic statistic or theory can account for human behavior, (if so, a minute percentage) but human behavior and emotion can definitely play into economics, because emotions for the most part fuel behavior, and behavior one of the core essences of any society, in regards to politics, societal aspects, and the economy.

[@vincentgrayjr.902]

Michael is correct. The fundamentals of economics rely on the statement that individuals make rational decisions with their money. Although, the study of economics does always have the saying, "On the other hand."

[@lcastill2013]

He's repeated on several occasions that this is an OVERSIMPLIFIED version of the business cycle. Start your own channel if you can explain the business cycle better in 8 minutes. :)

[@jordangauthier2674]

F.A. Hayek has addressed the Paradox of Saving or Thrift in his 1929 article titled, "The 'Paradox' of Savings" (mises.org/library/paradox-saving). Investor psychology, or human emotion, plays a role in the lengthening or contracting of the different periods of the boom-bust cycle. Time preferences of individuals may influence the general increase in prices, but the main cause of the boom-bust cycle, today, in the USA, is the manipulation of the money supply by the Federal Reserve Banking System. The rest of the observed effects are consequences of this manipulation. Empirical analysis has a hard time determining this from the data due to the tremendous amount of variables changing at all times and interfering with each other. Praxeology is a better methodology for determining the causes and their effects.

[@jordangauthier2674]

I do agree, however, that emotion is not a key driver of the boom-bust cycle. It is not a key driver, but an effect of the cause. This is a Keynesian take on the business cycle, but good luck using it to forecast the next business cycle.

[@stronghold10a]

call it emotion khan....

[@kabirmughal4234]

what the hell with these our Department Teachers... they didn't really knows the method of teaching... Thank you for the Video...

[@ashachoc]

Can't emotions be both the cause and effect of the business cycle?

[@annalynsawayan9594]

can u help me guiz... i have an assignment about HICKS. in subject mark1 need to explain with the suplorted documents...

[@HunterParkermusic]

I'm just watching some of these videos for a review for my macro final, so I already have a bit of knowledge of this stuff. So I heard him talk about human emotions and how that isn't taken into account in the GDP models, and I just thought, "Yes!! He's against Keynesianism just as much as I am!!"

[@mitchellboldin9472]

The Keynesians don't just care about GDP, and there is a rich literature out there about how GDP fails to account for everything.

[@jklal8374]

"when you lose your job, its depression" lol

[@garretlizotte6288]

"We see this trend every ten years or so"... Prophetic?

[@nthperson]

There is no real business cycle. Booms-to-busts occur every 18-20 years linked to property markets. And, these markets are driven by speculation in land; which, in turn, is exacerbated by easy and cheap credit -- and, most importantly, the very low effective rate of taxation on the "rent" of land. Hence, in the real economy a leftward leaning supply curve for land, with intensifying stress on uses of residential, commercial and all land forms. See Mason Gaffney's writing for a complete analysis.

[@AUniqueHandleName444]

You fail to mention productivity improvements due to capital accumulation, which seems like a huge oversight. You don't need to invent new things or discovery new resources to increase productivity. Building new real estate doesn't involve an increase in technology, resource discovery, or business processes, but it does boost economic output per worker by virtue of increasing output without increasing workers.

[@alexpred6079]

+Laereom using capital you purchase technology (or real estate) which in turn is an increase no?

[@carlosortegap]

Because that's short term productivity increase.

[@cdsilber]

I say no, because all the emotions in the world can't create trillions of dollars in credit out of thin air. Only the central bank and the fractional reserve multiplier can do that. But trillions of dollars in newly created credit can certainly cause asset price increases that fuel the "animal spirits" in businesses and investors. JMHO.

[@laurathefair]

Hahahahahahaha! the way he says technology @ 1:00 Hi-larious!

[@duenaya]

it either goes up or down right. so it's a model that really doesn't have much value. but i'll pretend i believe it coz i am taking econ.

[@sukhdevbishnoi8693]

try to make it more realistic as it is taught in the class.

[@ThePeterDislikeShow]

I wish people would eat less junk food, everyone would be more productive, and the entire pie would grow, and people, even those who used to make money off junk food, would have more to their name.

[@american236]

The corporations and big banks control the gdp. Or at least they try.

[@azb0111]

it can be manipulated.

[@504BlueDevil]

not a single word about the artificially manipulated price of money?

[@emir16ini]

Like I don't know that...

[@muhammedlaminceesay8888]

❤❤❤

[@nikunjrajput160]

I need this video in Hindi audio.i also go to ur hindi channel but u change medium as well in ur hindi channel. do u have any channel whose medium of writing is English but audio is Hindi....but whenever I switch to ur hindi channel in search of hindi audio it's medium of writing is also change to Hindi.... disappointed .... really....u should have a channel in which u may chose write in English but u need to speak hindi.the problem in India is just we need hindi audio content ....it's doesn't mean we don't read and write English ..just we have better understanding in hindi audio

[@SoundboothTheaterLive]

Mr. Khan, you seem to be a highly knowledgeable and diligent student of science. I sincerely hope that one day you put down the Keynes, and pick up the Mises. I guarantee you, Mises and praxeology are far more consistent with the true sciences than Keynes and his "animal spirits." Ludwig Von Mises, Human Action. The Ludwig Von Mises Institute is giving it away on their site. It pains me that a man with your credibility and intelligence is living without understanding Human Action.

[@carlosortegap]

Khan academy is a project; not the guide. How is Mises more consistent with Keynesians which actually use models and facts?

[@benmooney280]

What happens when the population decreases?

[@ledarriuswhite6327]

wats up walden

[@saadat700]

Your avatar made me punch my computer screen O_o lol

[@halimselim6743]

I am here after bitcoin crash !

[@wildbill0528]

not second

[@xcvsdxvsx]

hi vicki! i would love to explain it to you but i dont have quite enough room here in the comments section. can you add me as a contact please so i can send a private message?

[@Tyrant_13]

@chocobofarmer2021 You do realize Republicans have been Keynesians for at least 60 to 70 years, right?

[@Hoodratliker]

Is there a subject that you dont know?!?!?!

[@poojanegi9277]

it is helpful but not that much I like it as well as hate it so this means for u to improve :( :( :(

[@gurneev9]

he cant spell lol!