Money has four functions: a medium of exchange or means of payment, a store of value, a unit of account, and a standard of deferred payment. The medium of exchange function distinguishes money from other assets. In a barter economy, trading is costly because there must be a double coincidence of wants. Money, a medium of exchange, reduces the costs of exchange and allows resources to be used for other things. A token money is a convertible claim on commodity money. Because its monetary value greatly exceeds its production costs, token money economizes on the resource costs of trans- actions. Fiat money is money the government has declared legal tender. The central bank controls the supply of legal tender. Fintech is application of computer and internet technologies to facilitate the flow of payments and financial information. E-payments use debit cards, telephone banking, internet banking, e-transfers, and mobile banking, which provide access to manage deposit accounts and make payments. E-monies are multi-purpose pre-paid payment cards, and stored-value cards and gift cards for purchases at specific companies. Cryptocurrencies are a form of decentralized e-money. They are financial assets but have no centralized issuer and are not denominated in any national currency. They are not money in that they do not serve as a 'generally acceptable' means of payment. Bitcoin and Ethereum are examples. The Canadian money supply is the sum of currency in circulation outside the banks and bank deposits. The monetary base is comprised of notes and coins in circulation plus cash held by banks. The Canadian banking system is made up of a central bank and a number of commercial banks and other institutions called near banks.
Money has four functions: a medium of exchange or means of payment, a store of value, a unit of account, and a standard of deferred payment. The medium of exchange function distinguishes money from other assets. In a barter economy, trading is costly because there must be a double coincidence of wants. Money, a medium of exchange, reduces the costs of exchange and allows resources to be used for other things. A token money is a convertible claim on commodity money. Because its monetary value greatly exceeds its production costs, token money economizes on the resource costs of trans- actions. Fiat money is money the government has declared legal tender. The central bank controls the supply of legal tender. Fintech is application of computer and internet technologies to facilitate the flow of payments and financial information. E-payments use debit cards, telephone banking, internet banking, e-transfers, and mobile banking, which provide access to manage deposit accounts and make payments. E-monies are multi-purpose pre-paid payment cards, and stored-value cards and gift cards for purchases at specific companies. Cryptocurrencies are a form of decentralized e-money. They are financial assets but have no centralized issuer and are not denominated in any national currency. They are not money in that they do not serve as a 'generally acceptable' means of payment. Bitcoin and Ethereum are examples. The Canadian money supply is the sum of currency in circulation outside the banks and bank deposits. The monetary base is comprised of notes and coins in circulation plus cash held by banks. The Canadian banking system is made up of a central bank and a number of commercial banks and other institutions called near banks.
Chapter1: Making Economics Decisions
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The Canadian banking system is made up of a central bank and a number of commercial
banks and other institutions called near banks.
Banks are financial intermediaries. Bank deposits, which can be transferred by cheque or
debit card, provide a convenient means of payment. Bank services plus interest payments
on deposits attract funds into the bank. Banks use these funds to make loans, purchase se-
curities, and finance expenditures. The general acceptance of bank deposits as money, and
Key Concepts 533
well-developed financial markets, allow modern banks to operate with very low cash reserve
ratios.
Clearing balances: cash balances used by a bank to settle the differences between its cus-
tomers' payments and receipts involving other banks.
Banks create money by making loans and creating deposits based on a fractional cash re-
serve ratio, rr. The banks' reserve ratio involves a trade-off between earnings and bankers'
risk.
The monetary base MB is currency in circulation plus banks' cash reserves. The money
multiplier is a ratio of a change in the money supply to the change in the monetary base that
caused it, AM/AMB. The money multiplier is larger the smaller is the cash reserve ratio of
the banks, rr.
The money supply, M, is currency in circulation plus bank deposits. The size of the money
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Money has four functions: a medium of exchange or means of payment, a store of value, a
unit of account, and a standard of deferred payment. The medium of exchange function
distinguishes money from other assets.
In a barter economy, trading is costly because there must be a double coincidence of wants.
Money, a medium of exchange, reduces the costs of exchange and allows resources to be used
for other things.
A token money is a convertible claim on commodity money. Because its monetary value
greatly exceeds its production costs, token money economizes on the resource costs of trans-
actions.
Fiat money is money the government has declared legal tender. The central bank controls
the supply of legal tender.
Fintech is application of computer and internet technologies to facilitate the flow of payments
and financial information.
E-payments use debit cards, telephone banking, internet banking, e-transfers, and mobile
banking, which provide access to manage deposit accounts and make payments.
E-monies are multi-purpose pre-paid payment cards, and stored-value cards and gift cards for
purchases at specific companies.
Cryptocurrencies are a form of decentralized e-money. They are financial assets but have no
centralized issuer and are not denominated in any national currency. They are not money in
that they do not serve as a 'generally acceptable' means of payment. Bitcoin and Ethereum
are examples.
The Canadian money supply is the sum of currency in circulation outside the banks and bank
deposits.
The monetary base is comprised of notes and coins in circulation plus cash held by banks.
The Canadian banking system is made up of a central bank and a number of commercial
banks and other institutions called near banks.
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