Ch.8 Money & Banking Flashcards
3 Functions that
Money serves
① Medium of X
② Store of Wealth
③ Unit of Acct
4 Types of Money
① Commodity Money
② Coins
③ Paper Money
④ Chequebook Money
e.g. Bank Deposits
A System in which
Banks keep a small amt of Cash reserved for Deposits
& loan out excess
Fractional Reserve System
4 Measures of
Money Supply
① M1 = Currency + Demand Deposits
e.g. $$+Chequing Accts in chartered banks
② M2 = M1 + (Notice + Personal Term) Deposits
e.g. M1+ savings accts + CD/GIC
③ M2+ = M2 + Near-Banks Deposits
④ M2++ = M2+ + Canada Savings Bonds + Mutual Funds
4 Non-Money
Valuables
① $ in Bank Vault/Till
② Gold
③ Financial Securities
e.g. stock/ bond
④ Cheque & Credit/Debit Card
The △interest rates
btw bank’s borrower & depositor
Spread
Total Profits of Bank
come more from ___
Total Volume of
Transactions (loan interests)
The Portion of Deposits in Cash that Banks hold
Target Reserve Ratio
Target Reserves = ?
Excess Reserves = ?
TR = Target Reserve Ratio
x Demand Deposits
ER = Actual Reserves
- Target Reserves
2 Categories of
Real Assets
① Personal Assets
e.g. car/ boat/ jewelry
② Real Estate
e.g. house/ bldg/ land
Money Multiplier =
= 1 / Target Reserve Ratio
. △ Deposits
= ———————-
. △ Reserves
△Balance Sheet
When Loan is issued &
Cheque is deposited/cleared
@Same Bank or
Another Bank
⇒ All Banking System
When Cheque is deposited@
Same Bank
Reserves N/E| Deposits ↑
Loan ↑
Another Bank
Reserves ↑| Deposits ↑
while original bank
res. ↓| Deposits N/E (↑ then↓)
loan ↑
⇒All System
Res. N/E| Dep. ↑xmultiplier
Loan ↑xmultiplier
△Balance Sheet of
All Banking System
When Fully Loaned Up
Res. N/E | Deposits ↑
Loan ↑
↑幅度 = ExcessRes x multiplier
If Reserves is short of $5 bn, how much Loans to be Called-in?
Money Multiplier=10
$5 bn x 10 = $50 bn
Banks create/destroy
___ & ___
r/t Currency
Loans &
Demand Deposits
