Chapter 18: Understanding Money, Banking and Credit Flashcards

1
Q

is a medium of exchange, a measure of value and a store of value

A

money

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2
Q

a system of exchange in which goods/services are traded directly for other goods/services

A

barter

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3
Q

without a medium of exchange, the economy falls into a

A

barter system

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4
Q

money stored in chequing accounts that depositors can withdraw on demand

A

demand deposits

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5
Q

money invested for a specific time

A

time deposits

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6
Q

a measure of money supply that consists of currency and chequing accounts

A

M1

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7
Q

a measure of money supply that consists of M1 plus savings accounts and other types of time-based deposit accounts

A

M2

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8
Q

a measure of money that includes M2 plus Canadian residents’ foreign currency deposits and non-personal deposists

A

M3

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9
Q

deposits at a bank that pay interest but cannot be withdrawn on demand

A

term deposit

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10
Q

3 main components of Canada’s money supply are

A

currency, demand deposits, and time deposits

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11
Q

used as a substitute for cash and are a form of borrowing

A

credit cards (plastic money)

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12
Q

a decrease of prices in an economy over time

A

deflation

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13
Q

an increase of prices in an economy over time

A

inflation

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14
Q

is responsible for regulating money supply

A

Bank of Canada

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15
Q

the purchase or sale of Canadian gov. securities by the Bank of Canada to stimulate or slow down the economy

A

open market operations

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16
Q

the interest rate that our major financial institutions borrow from each other “overnight”

A

overnight rate

17
Q

the signal to the major participants in the money market as to what the Bank of Canada is aiming for when participants borrow and lend one-day funds to each other

A

target for the overnight rate

18
Q

the most important function of the Bank of Canada is carrying out

A

monetary policy

19
Q

2 tools used by the Bank of Canada in managing the money supply are

A

open market operations and the overnight rate

20
Q

when the B.o.C buys/sells government securities in order to influence the money supply and the overall economy

A

open market operations

21
Q
  • the B.o.C will buy government securities from the public and the banking system
  • it injects cash into the banking system
A

expansionary open market operations

22
Q
  • the B.o.C sells gov. securities to the public and banking system
  • it removes cash from the banking system
A

contractionary open market operation

23
Q

when financial institutions act as intermediaries between lenders and borrowers of funds

A

financial intermediation

24
Q

an independent agency of the Gov. of Canada that regulates federally registered banks, insurers, trust and loan companies, credit unions, fraternal benefit societies, and private pension plans

A

Office of Superintendent of Financial Institutions (OSIF)

25
financial institutions fall into 1 of 2 groups
depository or non-depository
26
institutions accept deposits (banks, trust companies and credit unions)
depository institutions
27
do not accept deposits (mutual fund companies and pension companies)
non-depository institutions
28
a profit-making organization that accepts deposits, makes loans and related services to customers
chartered bank
29
- accepts deposits from and lends money to its members only | - are usually small and locally owned
credit unions and caisse populaire
30
- only financial institution allowed to administer trusts | - operate through a network of branches and may operate under provincial or federal legislation
trust company
31
federal Crown corporation created to provide deposit insurance and contribute to the stability of Canada's financial system - insures only deposit accounts
Canada Deposit Insurance Corporation (CDIC)