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ECON 1020 (99)
Lecture 69

ECON 1020 Lecture 69: Lecture 69

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ECON 1020
Ryan A.Compton

OS82 CHAPTER 12 Money, Banking, and Money Creation The Definition and Functions of Money: Money: an asset widely accepted as a means of payment Functions of Money: o Medium of exchange Unit of account A way to value each product in terms of money (I can see my value in my owning of things in terms of a dollar amount) Store of value Holds value over time (more or less) The Components of Money Supply: Many measures of the money supply M1: currency in circulation + demand deposits Currency in circulation is money in the hands of the public Demands deposits a particular type of account in banks Two qualifications: 1. Currency held by the Bank of Canada and chartered banks is excluded from M2 and other measures of money supply 2. Also excluded from the money supply are any deposits of the federal government of the Bank of Canada that are held by chartered banks M2: M1 + near monies Near monies: highly liquid financial assets that do not directly function as a medium of exchange, but can be readily converted into currency Ex: savings accounts, term deposit Figure 121 Components of Money Supply M1, M2, M2+, and M2++ in Canada: Know that there is such a thing as M2+ and M2++ (you dont need to know what they are) Know they become less liquid as it goes on What Backs the Money Supply:
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