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This lecture covers the biophysical basis of T₂* changes in Blood Oxygenation Level Dependent (BOLD) contrast, explaining how magnetic susceptibility affects BOLD signal. It also explores how BOLD contrast measures deoxy-hemoglobin content and its implications on brain physiology, including the steady-state hemodynamic response. Additionally, it delves into the imaging of brain function using functional MRI (fMRI) through brain activation analysis and T₂*-weighted images. The lecture concludes with a discussion on how magnetic susceptibility differences impact T₂* and methods to minimize these effects.