money and banking

Question 1

what are the three functions of money

Answer 1

medium of exchange, store of value, unit of account

Question 2

what is a medium of exchange

Answer 2

something that someone else will readily accept as payment for their goods

Question 3

what is a double coincidence of wants

Answer 3

its when you barter and find something you want the other person has to want what you have to offer this is why money is better cuz people will always be willing to sell there goods for money

Question 4

what is a store of value

Answer 4

something that value should stay relatively the same and wont parish / go bad

Question 5

what is unit of account

Answer 5

exchanges compare values of things exchanged and that comparison is easy if the value of everything is the same units ie Canadian dollar

Question 6

what is fiat money

Answer 6

its money that is not backed by a commodity like gold but instead its backed by the public faith of the issuer o the currency ie usd is backed by the us gov

Question 7

what is the relationship of the bank of Canada and the government

Answer 7

it is instrument independent. the bank of Canada is a crown corp and is fully owned by the government but the government doesn’t control or manage the bank instead it gives the bank goals to achieve and the bank decides how to achieve the goals.

Question 8

what are the functions of the bank of Canada

Answer 8

its the bank of the fed , its the bank for the banks , its the lender of last resort , its the regulator of money supply

Question 9

what does it mean to be the bank of the fed

Answer 9

its like the TD for the government

Question 10

what does it mean to be the bankers bank

Answer 10

banks deposit money into the BOC and the BOC also gives out loans to private banks

Question 11

what does it mean to be the lender of last resort

Answer 11

if banks cant find money or lend money from anywhere else then there last resort is to go to the BOC and get a loan

Question 12

what is a monetary policy maker

Answer 12

the BOC is able to control the amount of money in the economy ( print out money)

Question 13

what is the goal of a private bank

Answer 13

a private bank is a business and like every other business its goal is to maximize profits

Question 14

how do banks make money

Answer 14

by taking deposits from the public and then loaning a portion of that money to other people

Question 15

what is the cost of deposits

Answer 15

the banks payout interest as the cost of deposits

Question 16

what is a new deposit

Answer 16

money that wasn’t previously apart of the system which has now been deposited and is considered a new deposit

Question 17

how does the BOC measure monetary supply

Answer 17

by creating monetary aggregates

Question 18

who defines monetary aggregates

Answer 18

the bank of Canada

Question 19

what is the Canadian dollar backed by

Answer 19

the dollar is backed by the government and is not backed by any commodity

Question 20

when comparing prices of goods what are you using money as

Answer 20

your using money as a unit of account

Question 21

why do people accept cash as payment

Answer 21

because they believe that the cash will retain its value and they believe others will accept the cash they received so they can buy goods too