Chapter 10

Question 1

Medium of exchange

Answer 1

an item that buyers give sellers when they want to purchase goods or services (money)

Question 2

Unit of account

Answer 2

the yardstick people use to post prices and record debts

Question 3

Store of value

Answer 3

retains its wealth overtime (gold)

Question 4

fiat money

Answer 4

not backed by physical (USD, CAD)

Question 5

commodity money

Answer 5

has intrinsic value (cattle, gold)

Question 6

demand deposits

Answer 6

balances in bank accounts that depositors can access on demand

Question 7

BoC role in economy

Answer 7

issue currency, control mode supply, banker to gov and banks

Question 8

money multiplier

Answer 8

amount of money banking system generates with each dollar it gets

Question 9

How do banks become insolvent?

Answer 9

when their liabilities exceed their assets, leading to an inability to meet financial obligations.

Question 10

why do bank runs happen?

Answer 10

when a large number of depositors all withdraw funds

Question 11

what is the role of insurance (CDIC)?

Answer 11

protects depositors against losses in the event of a bank failure