chapter 10 Flashcards
commodity money
A good used as money that also has value independent of its use as money
The Functions of Money
It must act as a medium of exchange.
It must serve as a unit of account.
It must serve as a store of value.
It must provide a standard of deferred payment.
FIAT MONEY
which has no value except as money.
What Can Serve as Money?
The asset must be acceptable to (that is, usable by) most people.
It should be of standardized quality so that any two units are identical.
It should be durable so that value is not lost by its quickly wearing out.
Reserves
deposits that a bank keeps as cash in its vault or on deposit with the bank of canada
simple deposit multiplier
the ratio of the amount of deposits created by banks to the amount of new reserves
operating band
bank of canadas 50 basis point range for the overnight interest rate
bank rate
interest rate the bank of canada charges on loans to banks
settlment balances
deposits held by banks in their accounts at the bank of canada
open market operations
the buying and selling of governemnt securities by the bank of canada in order to control the money supply
velocity of money
average # of time per year each dollar in the money supply is used to purchase goods and services included in GDP
