Chapter 18: Understanding Money, Banking and Credit Flashcards Preview

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Flashcards in Chapter 18: Understanding Money, Banking and Credit Deck (31)
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1
Q

is a medium of exchange, a measure of value and a store of value

A

money

2
Q

a system of exchange in which goods/services are traded directly for other goods/services

A

barter

3
Q

without a medium of exchange, the economy falls into a

A

barter system

4
Q

money stored in chequing accounts that depositors can withdraw on demand

A

demand deposits

5
Q

money invested for a specific time

A

time deposits

6
Q

a measure of money supply that consists of currency and chequing accounts

A

M1

7
Q

a measure of money supply that consists of M1 plus savings accounts and other types of time-based deposit accounts

A

M2

8
Q

a measure of money that includes M2 plus Canadian residents’ foreign currency deposits and non-personal deposists

A

M3

9
Q

deposits at a bank that pay interest but cannot be withdrawn on demand

A

term deposit

10
Q

3 main components of Canada’s money supply are

A

currency, demand deposits, and time deposits

11
Q

used as a substitute for cash and are a form of borrowing

A

credit cards (plastic money)

12
Q

a decrease of prices in an economy over time

A

deflation

13
Q

an increase of prices in an economy over time

A

inflation

14
Q

is responsible for regulating money supply

A

Bank of Canada

15
Q

the purchase or sale of Canadian gov. securities by the Bank of Canada to stimulate or slow down the economy

A

open market operations

16
Q

the interest rate that our major financial institutions borrow from each other “overnight”

A

overnight rate

17
Q

the signal to the major participants in the money market as to what the Bank of Canada is aiming for when participants borrow and lend one-day funds to each other

A

target for the overnight rate

18
Q

the most important function of the Bank of Canada is carrying out

A

monetary policy

19
Q

2 tools used by the Bank of Canada in managing the money supply are

A

open market operations and the overnight rate

20
Q

when the B.o.C buys/sells government securities in order to influence the money supply and the overall economy

A

open market operations

21
Q
  • the B.o.C will buy government securities from the public and the banking system
  • it injects cash into the banking system
A

expansionary open market operations

22
Q
  • the B.o.C sells gov. securities to the public and banking system
  • it removes cash from the banking system
A

contractionary open market operation

23
Q

when financial institutions act as intermediaries between lenders and borrowers of funds

A

financial intermediation

24
Q

an independent agency of the Gov. of Canada that regulates federally registered banks, insurers, trust and loan companies, credit unions, fraternal benefit societies, and private pension plans

A

Office of Superintendent of Financial Institutions (OSIF)

25
Q

financial institutions fall into 1 of 2 groups

A

depository or non-depository

26
Q

institutions accept deposits (banks, trust companies and credit unions)

A

depository institutions

27
Q

do not accept deposits (mutual fund companies and pension companies)

A

non-depository institutions

28
Q

a profit-making organization that accepts deposits, makes loans and related services to customers

A

chartered bank

29
Q
  • accepts deposits from and lends money to its members only

- are usually small and locally owned

A

credit unions and caisse populaire

30
Q
  • only financial institution allowed to administer trusts

- operate through a network of branches and may operate under provincial or federal legislation

A

trust company

31
Q

federal Crown corporation created to provide deposit insurance and contribute to the stability of Canada’s financial system
- insures only deposit accounts

A

Canada Deposit Insurance Corporation (CDIC)