ECON102 Lecture Notes - Lecture 25: American Institute For Economic Research, Excess Reserves, Money Supply

• School: University of Alberta
• Department: Economics
• Course: ECON102
• Professor: Andrew Wong

Document Summary

Econ 102 lecture 25 banks and the money supply. The money supply is the amount of money available in the economy. The money supply is managed by the bank of canada, which we"ll talk about later. The bank of canada classi es di erent types of money by their liquidity. The monetary base includes cash and bank reserves, some2mes referred to as hard money. M1 includes cash plus chequing account balances. Cheques are very liquid because the cheque tells the bank to pay the person cashing it in on demand. M2 includes m1 plus savings accounts and other nancial instruments. M1+ and m2+ are classi ca2ons of the rst two that includes the same liquidity at banks but also have it at ins2tu2ons that act like banks (atb financial, servus credit union) The central bank is the ins2tu2on responsible for managing the na2on"s money supply and coordina2ng the banking system. In canada, the central bank is the bank of canada.