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Econ 114 > Chapter 10 > Flashcards

Chapter 10 Flashcards

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1
Q

Is Money wealth?

A

No

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2
Q

Will Money make you better off?

A

No

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3
Q

Without Money trade would require _____.

A

Barter

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4
Q

Define: Barter

A

the exchange of one god or service for another

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5
Q

the unlikely occurrence that two people each ahvea good the other wants is..

A

double coincidence of wants

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6
Q

Most people have to spend time searching for others to trade with - huge waste of resources. This problem is solved with?

A

Money

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7
Q

Define Money

A

the set of assets that people regularly use to buy Goods and services from others.

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8
Q

T or F: Money is recognizable and it’s harder to barter.

A

False. easier to barter

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9
Q

What are the 3 Functions of Money?

A

Medium of exchange
Unit of account
Store of value (wealth)

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10
Q

The function of money :an item buyers give to sellers when they want to purchase Goods and services

A

Medium of exchange

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11
Q

A function of money :an item people can use to transfer purchasing power from the present to the future.

A

Store of Value

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12
Q

A function of money: the yardstick people use to post prices and record debts. (have a common value)

A

Unit of account

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13
Q

the 2 kinds of money

A

Commodity Money

Fiat money

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14
Q

take the form of a commodity with intrinsic value is…

A

commodity money

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15
Q

fiat money:

A

money without intrinsic value, used as money because of government decree.

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16
Q

The canadian Dollar is an example of what kind of money?

A

Fiat money

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17
Q

Gold coins, big macs, cigarettes, are examples of what kind of money?

A

commodity money

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18
Q

T or F : Money supply == money stalk

A

True

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19
Q

the quantity of money available in the economy is..

A

money supply/ money stock

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20
Q

What are the 2 assets that should be considered part of the money supply?

A

Currency

Demand deposits

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21
Q

Demand deposits

A

balances in bank accounts that depositors can access on demand by writing a cheque or using a debit card.

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22
Q

paper bills and coins in the hands of the (non-bank) public

A

currency

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23
Q

contract to pay back a loan

A

Asset

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24
Q

liquidity

A

how quickly money flows through the economy

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25
T or F: Credit --> spend Debit --> borrow
False; Credit --> borrow Debit --> spend
26
What are the 2 measures of the Money stock for the Canadian economY?
M1, M2
27
Chequable deposits + currency are what measure of money stock?
M1
28
Which is more liquid? M1 or M2?
M1
29
Central Bank: an institution designed to regulate the ____ _____ in the economy.
money supply
30
Bank of Canada
the central bank of canada
31
T or F: the bank of Canada prints money
False, must balance their books through interest rates.
32
T or F: Managed by a board of directors, composed of the governor, the senior deputy governor, and 12 directors, including the minister of Finance.
True
33
who appoints the bank of canada's board of directors?
minister of finance
34
How long is the the term for a governor and a senior deputy governor?
7 years. 3 for other directors
35
the difference in term lengths creates separation between politics and the bank T or F?
True
36
What are the 4 primary functions of the Bank of Canada
Issue currency act as a banker to the commercial banks act as a banker to the canadian government control the money supply
37
money supply is...
quantity of money available in the economy
38
monetary policy
decisions by policymakers conerning the money supply. (from the bank of canada, for the good of the economy)
39
Through what does the bank of Canada control the money supply?
commercial Banks
40
What is the function of a Commercial Bank?
influence the quantity of demand deposits in the economy and the money supply.
41
what type of bank includes credit unions, caisses populaires, and trust companies?
commercial banks
42
_______ _______ banking system: banks keep a fraction of deposits as reserves and use the rest to make loans
fractional reserve
43
fractional reserve banking system is how banks lose money T or F:
False ; make money
44
Reserves
a fraction of the amount of deposits made. the rest is loaned out.
45
Reserve ratio, R
= fraction of deposits that banks hold as reserves. | = total reserves as a percentage of total deposits
46
T or F: government insures M2 money ONLY
M1 money only; False
47
T- Account
a simplified accounting statement that shows a bank's assets & liabilities.
48
a banks liabilities include:
deposits
49
a banks assets include:
loans and reserves
50
T or F: banks lend to good credit
True
51
Suppose $100 is in circulation, and there is No banking system. what is the money supply?
$100
52
Suppose there is $100 in circulation and there is a 100% reserve banking system. (no loans) what is the money supply?
$100
53
T or F: A fractional reserve banking system | creates money and wealth
False ; A fractional reserve banking system creates money, but not wealth. - companies create the wealth
54
Define: the amount of money the banking system generates with each dollar of reserves
money multiplier
55
What is the Formula for the money multiplier?
1/R(reserve ratio)
56
What are the two tools in the Bank of Canada's monetary toolbox?
1. open-market operations | 2. Changing the overnight rate
57
The Bank of Canada conducts open-market operations when it buys or sells government _____ to the public:
bonds
58
When the Bank of Canada buys government bonds, money supply will ______
increase
59
When the Bank of Canada sells government bonds, money supply will ______
decrease
60
The Bank of Canada conducts foreign exchange market operations when it buys or sells _____ ______.
foreign currencies
61
The money supply ______ when the Bank of Canada buys foreign currency with Canadian currency.
increases
62
The money supply ______ when the Bank of Canada sells foreign currency.
decreases
63
the interest rate charged by the Bank of Canada on loans to the commercial banks:
bank rate
64
T or F: Central banks like the Bank of Canada act as bankers to the commercial banks.
True
65
the interest rate on very short- term loans between commercial banks
overnight rate
66
commercial banks never need to accept less than the bank rate, minus half a percent, when they make short-term loans, because they can always lend to the Bank of Canada instead. T or F?
True
67
Commercial banks usually need to pay more than the bank rate for short-term loans, because they can't always borrow from the Bank of Canada.
False; Commercial banks never need to pay more than the bank rate for short-term loans, because they can always borrow from the Bank of Canada instead.
68
T or F: A lower overnight rate discourages banks from borrowing reserves from the Bank of Canada.
false; A higher overnight rate discourages banks from borrowing reserves from the Bank of Canada.
69
T or F: An increase in the overnight rate reduces the quantity of reserves in the banking system, which in turn reduces the money supply.
True
70
Can the bank of Canada alter the money supply? if so how?
yes, by changing the bank rate and overnight rate indirectly
71
T or F: The Bank of Canada’s control of the money supply is precise.
False; The Bank of Canada’s control of the money supply is not precise.
72
what 2 things does the bank of canada not control when it comes to money:
1. households choose to hold as deposits in banks | 2. commercial bankers choose to lend
73
Money includes _____ and various types of bank ______.
currencies, deposits
74
In a fractional reserve banking system, banks create money when they make _____.
loans
75
The Bank of Canada is what kind of bank?
Central bank
76
The bank of canada controls the money supply through _____-_____ operations or by changing the ___ ____.
open-market, bank rate

Econ 114 (6 decks)

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