Class Chapt 9 money Flashcards Preview

Macroeconomics > Class Chapt 9 money > Flashcards

Flashcards in Class Chapt 9 money Deck (38)
Loading flashcards...
1
Q

3 caractristics of money?

A
  • Medium of exchange
  • Unit of account
  • Store of value
2
Q

What are the 2 official measures of money?

A

M1 and M2

3
Q

What includes M1?

A

Currency + chequable deposits

4
Q

What includes M2?

A

Currency + chequable deposits + all other deposits

5
Q

4 types of assets for a Chartered Bank?

A
  • Reserves
  • Liquid Assets
  • Securities
  • Loans
6
Q

Example of liquid Asset?

A
  • Government Treasury bills
  • Commercial bills
7
Q

Example of securities?

A

Mortgage Baked securities

8
Q

Functions of the Bank of Canada?

A
  • Sole issuer of currency
  • Banker to banks and government
  • Lender of last resource
9
Q

Biggest liability of the bank of Canada?

A

Bank of Canda notes in circulation

10
Q

Biggest Assets of the bank of Canada?

A

Canadian government securities

11
Q

Bank of Canada’s Two main policy tools?

A
  • Open market operations
  • Bank rate
12
Q

What is a Bank of Canada open market operation?

A

Is the purchase or sale of government securities

13
Q

Do “open market operations” influence banks’ reserves? True or False

A

True

14
Q

What is the Bank rate

A

Is the rate at which banks leand to each other and

15
Q

What is the equation for money creation of banks?

A

MB = R + C

16
Q

Explain: MB = R + C

A

Mb = Monetary Base (of Bank of Canada)
R = Reserves (desired reserve ratio that a bank has)
C = Currensy holdings (desired money hold buy people)

17
Q

What is the currency drain ratio?

A

Is the amount of money created that does not go back to the bank as deposits

18
Q

What is the money multiplier (MM)

A

ratio of the change in the quantity of money to the change in the monetary base

19
Q

The quantity of money created depends on ?

A

the desired reserve ratio (r) and the currency drain ratio (c)

20
Q

The smaller these ratios, the larger is the money multiplier? True or False

A

True

21
Q

4 facts that Influence on Money Holding

A
  • The price level
  • The nominal interest rate
  • Real GDP
  • Financial innovation
22
Q

what is Nominal money?

A

is the amount of money measured in dollars.

23
Q

what is Real money?

A

Nominal money ÷ Price level

24
Q

A rise in the price level increases the quantity of nominal money but doesn’t change the quantity of real money that people plan to hold. True or False?

A

True

25
Q

What is The Nominal Interest Rate?

A

The interest paid by bonds

26
Q

Example of finatial inovation?

A

ATM, Debit card, Internet banking

27
Q

What is The demand for money?

A

the relationship between the quantity of real money demanded and the nominal interest rate (when all other influences on the amount of money that people wish to hold remain the same.)

28
Q

If the market interest rate goes up, the previous bond price goes?

A

down

29
Q

If the market interest rate goes down,the previous bond price will go

A

up, (because this bond more attractive).

30
Q

A debit card is

A

not money.

31
Q

Which one of the following items is not included in the M1 definition of money?
A) currency outside banks.
B) personal chequable deposits
C) non-personal chequable deposits
D) fixed term deposits

A

D) fixed term deposits

32
Q

The amount of real money people want to hold will decrease if either real GDP________ or the interest rate ________.

A

decreases; rises

33
Q

Bonds offer a(n)

A

fixed stream of payments and a fixed time period.

34
Q

Reserves held by Canadian banks represent ________ percent of the value of all demand deposits.

A

less than 1

35
Q

an increase in real GDP moves the money demand curve to the?

A

right

36
Q

An increase in the Monetary Base moves the money supply curve to the?

A

right

37
Q

if Real GDP is $2,000 billion, the price level is 120 what is Nominal GDP

A

2000 * 1.2 = 2,400 billion

38
Q

Does the number of loans issued by chartered banks affect the size of the monetary base?

A

They do not affect the size of the monetary base