CH. 8 - Money + Banking

Question 1

Assets

Answer 1

The business owns and is owed

Question 2

Bank Rate

Answer 2

Interest rate Bank of Can. charges commercial banks

Question 3

Bill of Exchange

Answer 3

Paper - buyers promise to pay later for G + S received

Question 4

Commodity Money

Answer 4

Type of money - can function as commodity

Question 5

Demand Deposit

Answer 5

Money deposited in chequing account - available on demand

Question 6

Excess Reserves

Answer 6

Excess of target ratio

Question 7

Fiat Money

Answer 7

Anything declared as money by Gov.

Question 8

Frictional Reserve System

Answer 8

Banking system: Banks keep fraction of deposits in cash

Question 9

Leverage

Answer 9

Use of an asset to increase the amount of loans and potential return on assets

Question 10

Liabilities

Answer 10

Balance sheet: what company OWS

Question 11

M1

Answer 11

= currency in circulation + demand deposits

Question 12

M2

Answer 12

= M1 + Personal Term Deposit

Question 13

M3

Answer 13

= M2 + Certificates of Deposit (non-personal)

Question 14

Medium of Exchange

Answer 14

Something accepted as payment for G + S

Question 15

Money Multiplier

Answer 15

Increase in term deposits that occur across whole banking system b/c of NEW deposit in a single bank

Question 16

Near-Banks

Answer 16

Financial institutions - function similar to commercial banks but not connected to Bank of Canada

Question 17

Net Worth (Equity)

Answer 17

Assets - Liabilities of a company

Question 18

Notice Deposits

Answer 18

Money deposited in savings, but not available until notice given