Chapter 14

Question 0

Chartered banks or commercial banks

Answer 0

Financial institutions operating under federal charter; they accept deposits and make loans and investments

Question 1

Banking system

Answer 1

The association of the central bank and the chartered banks as part of a larger financial network

Question 2

Near banks

Answer 2

Financial institutions other than banks that accept deposits from the public

Question 3

Bank of Canada Act

Answer 3

Federal legislation that established the bank of Canada in 1934.

Question 4

Canada deposit insurance corporation

Answer 4

A federal crown corporation established in 1967 that insures bank deposits up to $100,000, in the case of bankruptcy at a participating bank

Question 5

Office of the superintendent of financial institutions

Answer 5

The principal regulatory body that supervises financial institutions

Question 6

Core CPI

Answer 6

Refers to an adjusted version of the total CPI excluding the most volatile components including seasonal produce like fruit and vegetables, gasoline, oil, natural gas, mortgage interest, and tobacco products

Question 7

Core inflation

Answer 7

A measure of inflation using the core CPI

Question 8

Fiduciary monetary system

Answer 8

Monetary system based on trust or confidence

Question 9

Balanced sheet

Answer 9

A statement of assets, liabilities and owner’s equity or capital

Question 10

Branch banking system

Answer 10

A banking system based on relatively few banks with many branches

Question 11

Bank Act

Answer 11

Federal legislation that governs the operations of chartered banks

Question 12

Interest spread

Answer 12

The difference between the interest rate that banks charge for loans and the interest rate they pay their depositors

Question 13

Debentures

Answer 13

Bonds secured by the creditworthiness of the borrower rather than by specific assets

Question 14

Fractional reserve banking system

Answer 14

A banking system in which banks keep only a fraction of their deposits in cash reserves

Question 15

Target reserve ratio

Answer 15

The fraction of demand deposits that chartered banks hold as cash reserves

Question 16

Desired reserves

Answer 16

The minimum amount of reserved that banks desire to hold

Question 17

Primary reserves

Answer 17

Bank reserves held in cash

Question 18

Secondary reserves

Answer 18

Liquid assets, such as currency, day-to-day loans, treasury bills, and call and short loans, held as reserves

Question 19

Initial deposit or primary deposit

Answer 19

A deposit that a deposit-taking institution sells for cash

Question 20

Excess reserves

Answer 20

Cash reserves held in excess of the desired cash reserves

Question 21

Derivative deposit or secondary deposit

Answer 21

A deposit that is created by a bank when it extends a loan

Question 22

Deposit expansion multiplier or money multiplier

Answer 22

The number by which an initial bank deposit is multiplied to arrive at the resulting total deposits