Class Chapt 9 money Flashcards
3 caractristics of money?
- Medium of exchange
- Unit of account
- Store of value
What are the 2 official measures of money?
M1 and M2
What includes M1?
Currency + chequable deposits
What includes M2?
Currency + chequable deposits + all other deposits
4 types of assets for a Chartered Bank?
- Reserves
- Liquid Assets
- Securities
- Loans
Example of liquid Asset?
- Government Treasury bills
- Commercial bills
Example of securities?
Mortgage Baked securities
Functions of the Bank of Canada?
- Sole issuer of currency
- Banker to banks and government
- Lender of last resource
Biggest liability of the bank of Canada?
Bank of Canda notes in circulation
Biggest Assets of the bank of Canada?
Canadian government securities
Bank of Canada’s Two main policy tools?
- Open market operations
- Bank rate
What is a Bank of Canada open market operation?
Is the purchase or sale of government securities
Do “open market operations” influence banks’ reserves? True or False
True
What is the Bank rate
Is the rate at which banks leand to each other and
What is the equation for money creation of banks?
MB = R + C
Explain: MB = R + C
Mb = Monetary Base (of Bank of Canada)
R = Reserves (desired reserve ratio that a bank has)
C = Currensy holdings (desired money hold buy people)
What is the currency drain ratio?
Is the amount of money created that does not go back to the bank as deposits
What is the money multiplier (MM)
ratio of the change in the quantity of money to the change in the monetary base
The quantity of money created depends on ?
the desired reserve ratio (r) and the currency drain ratio (c)
The smaller these ratios, the larger is the money multiplier? True or False
True
4 facts that Influence on Money Holding
- The price level
- The nominal interest rate
- Real GDP
- Financial innovation
what is Nominal money?
is the amount of money measured in dollars.
what is Real money?
Nominal money ÷ Price level
A rise in the price level increases the quantity of nominal money but doesn’t change the quantity of real money that people plan to hold. True or False?
True
What is The Nominal Interest Rate?
The interest paid by bonds
Example of finatial inovation?
ATM, Debit card, Internet banking
What is The demand for money?
the relationship between the quantity of real money demanded and the nominal interest rate (when all other influences on the amount of money that people wish to hold remain the same.)
If the market interest rate goes up, the previous bond price goes?
down
If the market interest rate goes down,the previous bond price will go
up, (because this bond more attractive).
A debit card is
not money.
Which one of the following items is not included in the M1 definition of money?
A) currency outside banks.
B) personal chequable deposits
C) non-personal chequable deposits
D) fixed term deposits
D) fixed term deposits
The amount of real money people want to hold will decrease if either real GDP________ or the interest rate ________.
decreases; rises
Bonds offer a(n)
fixed stream of payments and a fixed time period.
Reserves held by Canadian banks represent ________ percent of the value of all demand deposits.
less than 1
an increase in real GDP moves the money demand curve to the?
right
An increase in the Monetary Base moves the money supply curve to the?
right
if Real GDP is $2,000 billion, the price level is 120 what is Nominal GDP
2000 * 1.2 = 2,400 billion
Does the number of loans issued by chartered banks affect the size of the monetary base?
They do not affect the size of the monetary base
