Final MGMT 1035: Week 9 Flashcards
Global Finance
What is money?
Any generally accepted medium of exchange which enables a society to trade goods without the need for barter; any objects or tokens regarded as a store of value and used as a medium of exchanges
Forms of Money?
o Coins: valued for metal content or representative tokens
o Paper Money: issued to represent values, from ancient China to modern societies
o digital currency: exchanged as information, rather than physical money
All of these work on with shared consensus of value.
Three kinds of money?
commodity, token, fiat
Commodity
gold and silver coins, but also things like shell, grain to other agreed items of value
Token
coins or paper that can be exchanged for the face value of gold or silver “gold standard”
Fiat Money?
money issued by the government
not backed by gold or another commodity but rather by declaration of the issuing government
The Big Mac Index illustrates…
Purchasing-Power Parity
The U.S. Federal Reserve was created in response to what crisis?
The 1907 financial Crisis.
The Treaty which created the clear rules for the creation of a common European currency was…
The Maastricht Treaty
When it was created in 1694 the purpose of the Bank of England was to…
Raise money for the Navy
Potosi is situated in which country?
Bolivia
Globally, the most popular form of exchange rate is…
Managed Floating
The Canadian dollar is an example of…
Fiat money
The style of bank system in Canada is best decribed as…
branch banking
Actual Euro notes and coins began to be distributed in…
2002
What was the first city of capitalism?
Potosi
for it supplied the primary ingredient of capitalism: money
What changed the nature of trade with China and other parts of Asia and drove Europe to seek their own colonial opportunities?
Spanish silver
the birth of global economics and trade
What was the global economic impact of gold and silver from South and Central America?
The influx of gold and silver changed global economies, transitioning Europe to a cash-based system. This shift facilitated the development of capitalism focused on monetary exchange rather than barter.
What country’s the world’s leading sources of lithium?
Potosi, Bolivia
(influence on capitalism)
What was the first central bank?
Bank of England, the model for most Central Banks, was formed in 1694
Why was the Bank of England formed?
Designed to raise money for the government to finance a navy
What is the US central bank?
Federal Reserve created, 1913
What is the role of the Federal Reserve?
- Maximize employment
- Stabilize Prices
- Moderate Long-term interest rates
(Regulate banks and supervised, approved financial mergers, and stabilized the financial system)
Why was the Federal Reserve created?
response to financial cries of 1907 and a desire to ease ups and down in the economy
Who helped recover the financial crisis for the federal reserve?
JP Morgan, was given 30 million dollars and was told to fix the New York banking systems survived the crisis
pledged large sums of his own money and convinced other New York bankers to do the same to shore up the banking system.
What was the financial crisis of 1907, leading to the federal reserve?
Enter real estate transactions that didn’t go as planned and faced a situation where they didn’t have enough cash to meet deposits, leading to a failure for a bank
How did the US Government help the financial crisis of 1907?
looked to government for support and federal government gave them about 30 million dollars
Who helped create the Federal Reserve, and helped which state?
JP Morgan, New York
When/ What was the Federal Reserve Act?
1913;It was implemented to establish economic stability in the U.S. by introducing a central bank to oversee monetary policy, shaping the U.S. financial system.
When did Canada abandoned the gold standard?
1931
after Great Depression allowing Canada to reinflate economy
What’s the Royal Commission for the Bank of Canda ?
established in 1933 to study issue of central bank: monetary and banking issues
headed by Lord Macmillan
When was the Bank of Canada established and its role?
1935; control Canada’s monetary supply and moderate inflation
promote the economic and financial welfare of Canada
When was a standardized currency introduced in Canada?
1950
When and where did chartered banking begin in Canada?
Chartered banking began with the Bank of Montreal in 1817, followed by others like the Bank of Nova Scotia in 1832.
How did the Canadian government structure the banking system?
The government encouraged a branch banking system dominated by small banks, which grew into the “Big 5” controlling branches across Canada.
How did banking in Canada differ from the U.S.?
Canada-> centralized branch banking system
U.S. -> created a decentralized system of many small banks.
What was the significance of the 1967 Bank Act revisions in Canada?
removed the 6% annual interest rate on personal loans
banks entered the mortgage field
What company came about after the Bank Act?
Canadian Deposit Insurance Company
What triggered stronger banking regulations in Canada after 1923?
The failure of the Home Bank in 1923
leading to reforms that strengthened the banking system—essential during the 1929 Great Depression.
What key changes followed the 1964 Porter Commission recommendations?
enter the mortgage market, be more competitive banking system
The Euro is the official currency of how many members of the EU?
20 out of 27