BSM 100 Lecture Notes - Lecture 2: Offshoring, Gross Domestic Product, Structural Unemployment

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Bsm 100 the genesis of a business (part 3) Monetary policy: actions that shape the economy by influencing interest rates and the money supply, government has complete knowledge of what they do. Short term 6 months - 1 year: m1 money supply. All currency, ready money: m2 money supply. Money that is available but not exact cash in your hands. Credit cards are not included: bank of canada. Manages money supply and manage the interest rate. Keeps the currency supply in good condition. Interest rate increases (sell bonds, take money away): fees increase and economy"s interest rate goes up (becomes more expensive to borrow) Interest rate decreases (buy bonds): cheaper for us to borrow. No rule in canada that says we have to maintain a reserve with a bank. Keeps 2% of their deposits --> not a rule, but a norm. Buy bonds (long term)/ treasury bills (short term, face value, discounted, riskless) You can buy shares in (stock exchange)

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