"BlackHole is a modern macOS virtual audio loopback driver that allows applications to pass audio to other applications with zero additional latency."

How does this work? BlackHole is a MIDI extension. Open Audio MIDI Setup and you see it there and it has stereo inputs and outputs (there are versions of BlackHole for 16 and 64 channels). Add a Multi-Output Device with BlackHole and your standard output (such as speakers or headphones). Set your Sound output to the new MOD.

Now you still hear your computer audio like normal (one thing I noticed is that you can't change sound volume directly -- you have to change Sound to your regular device, change volume, then set back to MOD device) and there that sound is going into BlackHole as an input. In programs that record audio you can set your input device to BlackHole and now you can record whatever audio your computer is playing.

Mostly I've been using BlackHole for years with GarageBand to record music from streaming sources (not YouTube since you can download the video then extract the audio if you wanted to). If an application supports setting an audio output you could instead output to BlackHole then in the second application input from BlackHole and that way direct audio from one application to another (but few apps let you set where they send audio).

BlackHole used to be free but now it's $10 donation-ware (i.e. optional donation) which I paid. If you want an actual app that's polished and well featured Rogue Amoeba has Loopback ($100) though that's priced for a pro/semi-pro audience.