ECON 1P92 Lecture Notes - Commercial Bank, Time Deposit, Shortage

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ECON 1P92 Full Course Notes
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ECON 1P92 Full Course Notes
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Households keep a fixed fraction of their funds in cash. If c is the ratio of cash to deposits (c/d) that people want to maintain: change in deposits= (change in reserves)/(c+v) Total quantity of money in economy at any time. Consists of currency plus various types of deposits. Kinds of deposits: various definitions of the money supply, depending on types of deposits included. Assets that are a store of value. Readily converted into a medium of exchange (money) Term deposit: good store of value (earns interest, poor medium of exchange. Serve as a temporary medium of exchange. Not a store of value (i. e. credit card) Choice between keeping money or chequing accounts: depends on need for convenience vs. interest earnings. No perfect definition of money, near money, or a money substitute. New financial assets are continually being developed: serve some or all functions of money.

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