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

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

money

2

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

barter

3

without a medium of exchange, the economy falls into a

barter system

4

money stored in chequing accounts that depositors can withdraw on demand

demand deposits

5

money invested for a specific time

time deposits

6

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

M1

7

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

M2

8

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

M3

9

deposits at a bank that pay interest but cannot be withdrawn on demand

term deposit

10

3 main components of Canada's money supply are

currency, demand deposits, and time deposits

11

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

credit cards (plastic money)

12

a decrease of prices in an economy over time

deflation

13

an increase of prices in an economy over time

inflation

14

is responsible for regulating money supply

Bank of Canada

15

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

open market operations

16

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

overnight rate

17

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

target for the overnight rate

18

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

monetary policy

19

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

open market operations and the overnight rate

20

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

open market operations

21

- the B.o.C will buy government securities from the public and the banking system
- it injects cash into the banking system

expansionary open market operations

22

- the B.o.C sells gov. securities to the public and banking system
- it removes cash from the banking system

contractionary open market operation

23

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

financial intermediation

24

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

Office of Superintendent of Financial Institutions (OSIF)

25

financial institutions fall into 1 of 2 groups

depository or non-depository

26

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

depository institutions

27

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

non-depository institutions

28

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

chartered bank

29

- accepts deposits from and lends money to its members only
- are usually small and locally owned

credit unions and caisse populaire

30

- only financial institution allowed to administer trusts
- operate through a network of branches and may operate under provincial or federal legislation

trust company