Ch14 Flashcards
money
any object generally accepted by ppl as payment for goods and services
- anything that is portable, divisible, durable, and stable
barter economy
one in which goods are exchanged directly for one another
three functions of money
- it is a medium of exchange
- it is a store of value
- it is a unit of account
M-1
only the most liquid forms of money (currency and demand deposits (chequing accounts))
currency
paper money and coins issued by government
cheque
order instructing the bank to pay a given sum to a specified person or company
demand deposits
money in chequing accounts
M-2
everything in M-1 plus savings deposits, time deposits, and money market mutual funds
time deposit
deposit that requires prior notice to make a withdrawal; cannot be transferred to others by cheque
money market mutual funds
funds operated by investment companies that bring together pools of assets from many investors to buy short-term, low=risk financial securities
four legal pillars of financial community in Canada
- chartered banks
- alternate banks (trust companies, credit unions, etc)
- life insurance companies and other specialized lending/saving intermediaries (pensions, mutual funds, etc)
- investment dealers
changes in financial institutions
- banks can own securities dealers, establish subsidiaries to sell mutual funds, andsell commercial paper
chartered bank
privately owned, profit-seeking firm that serves individuals, non-business organizations, and businesses as a financial intermediary
- main source of short-term loans for businesses
schedule I banks
Canadian-owned and have no more than 10% of voting shares controlled by a single interest
schedule II banks
may be domestically owned, but do not meet the 10% limit or are foreign-controlled
trust services by bank
trust department will (in exchange for fees) perform tasks such as making ur monthly bill payments and managing your investment portfolio
- also manage estates of deceased persons
international services offered by banks
currency exchange, letters of credit, and banker’s acceptances
letter of credit
promise by a bank to pay money to a business firm if certain conditions are met
banker’s acceptance
a promise that a bank will pay a specified amount of money at a future date
electronic funds transfer (eft)
provides for payments and collections by transferring financial info electronically
automated banking machines (ABM)
electronic machines that enable bank customers to conduct account-related transactions any time
direct deposits and withdrawals
enable user to authorize, in advance, specific, regular deposits and withdrawals
point-of-sale transfers
permits consumers to pay for retail purchase with debit card
debit card
card which immediately reduces the balance in user’s bank account upon use and transfers it to store’s account