Definitions

Question 0

M-1

Answer 0

Only the most liquid forms of money (currency & demand deposits)

Question 1

Money

Answer 1

Any object generally accepted by people as payment for goods & services.

Question 2

Currency

Answer 2

Paper money & coins issued by the government.

Question 3

Cheque

Answer 3

An order instructing the bank to pay a given sum to a specified person or firm.

Question 4

Demand Deposits

Answer 4

Money in chequing accounts; counted as M-1 because such funds may be withdrawn at any time without notice.

Question 5

M-2

Answer 5

Everything in M-1 plus savings deposits, time deposits, and money market mutual funds,

Question 6

Time Deposit

Answer 6

A deposit that requires prior notice to make a withdrawal; cannot be transferred to others by cheque.

Question 7

Money Market Mutual Funds

Answer 7

Funds operated by investment companies that bring together pools of assets from many investors to buy short-term, low-risk financial securities.

Question 8

Chartered Bank

Answer 8

A privately owned, profit-seeking firm that serves individuals, non-business organizations, and business as a financial intermediary.

Question 9

Letter of Credit

Answer 9

A promise by a bank to pay money to a business firm if certain conditions are met.

Question 10

Banker’s Acceptance

Answer 10

A promise that a bank will pay a specified amount of money at a future date.

Question 11

Automated Banking Machines (ABMs)

Answer 11

Electronic machines that enable bank customers to conduct account related transactions 24 hours a day, 7 days a week.

Question 12

Debit Card

Answer 12

A type of plastic money that immediately upon use reduces the balance in the user’s bank account and transfers it to the store’s account.

Question 13

Prime Rate of Interest

Answer 13

The lowest rate charged to borrowers.

Question 14

Reserve Requirement

Answer 14

The requirement (until 1991) that banks keep a portion of their chequable deposits in vault cash as deposits with the Bank of Canada.

Question 15

Bank of Canada

Answer 15

Canada’s central bank; formed in 1935.

Question 16

Bank Rate (Rediscount Rate)

Answer 16

The rate at which chartered banks can borrow from the Bank of Canada.

Question 17

Trust Company

Answer 17

Safeguards funds and estates entrusted to it; may also serve as trustee, transfer agent, and registrar for corporations.

Question 18

Credit Unions (Caisses Populaires)

Answer 18

Cooperative savings and lending association formed by a group with common interests.

Question 19

Life Insurance Company

Answer 19

A mutual or stock company that shares risk with its policyholders for payment of premiums.

Question 20

Factoring Company (or Factor)

Answer 20

Buys accounts receivable from a firm for less than their face value and then collects the face value of the receivables.

Question 21

Sales Finance Company

Answer 21

Specializes in financing instalment purchases made by individuals or firms.

Question 22

Consumer Finance Company

Answer 22

Makes personal loans to consumers.

Question 23

Venture Capital Firm

Answer 23

Provides funds for new or expanding firms thought to have significant potential.

Question 24

Pension Fund

Answer 24

Accumulates money that will be paid out to plan subscribers in the future.

Question 25

Law of One Price

Answer 25

The principle that identical products should sell for the same price in all countries.

Question 26

World Bank

Answer 26

A United Nations agency that provides a limited scope of financial services, such as funding national improvements in undeveloped countires.

Question 27

International Monetary Fund (IMF)

Answer 27

United Nations agency consisting of 188 nations that have combined resources to promote stable exchange rates, provide temporary short-term loans, and serve other purposes.