Ch.12 Flashcards
(18 cards)
Economics 12
Chapter 12 Vocabulary
bank note
Paper currency issued by a country’s central bank.
bank rate
The rate of interest charged by the Bank of Canada to the chartered banks, which serves as a benchmark for the interest rates charged by financial institutions to their customers.
bond
A financial asset that represents a debt owed by a corporation to the holder, on which interest is paid by the corporation.
chartered bank
A bank established by a charter passed by the Canadian federal government.
easy money
A monetary policy of low interest rates, easy availability of credit, and growth of the money supply.
foreign exchange reserve
The store of foreign currencies and gold held by the central bank, used at times to intervene in the foreign exchage market.
inflation premium
An allowance for inflation that is built into all interest rates.
interest rate
The price charged for borrowing money.
monetary policy
A process by which the government affects the economy by influencing the expansion of money and credit.
nominal interest rate
An interest that includes an inflation premium, an allowance for risk, and credit worthiness.
operating band
The range of 0.5 per cent between the bank rate charged by the Bank of Canada and the interest it pays on deposits; the overnight rate target is set at its midpoint.
overnight rate
The rate of interest, controlled by the Bank of Canada, that is charged by financial institutions on short-term loans made between them; it is set within the operating band.
overnight rate target
A monetary tool used by the Bank of Canada to control the overnight rate: it is set by the Bank of Canada at the midpoint of the operating band.
prime rate
The lowest rate of interest a financial institution offers to its customers, such as large corporations.
rate of return
The amount of extra revenue an investment by a business in new machinery, new technology, or a new plant will bring in.
real rate of interest
The nominal rate of interest minus the expected rate of inflation.
tight money
A monetary policy of high interest rates, more difficult availability of credit, and a decrease in the money supply.
