Week 5 chapter notes

3 Pages
Unlock Document

University of Toronto Scarborough
Economics for Management Studies
Jack Parkinson

Chapter 4 Money and Inflation Notes N inflation an increase in the overall level of prices N hyperinflation extremely high inflation 4.1 What is Money? N money the stock of assets used for transactions The Functions of Money N money has three purposes: store of value, unit of account, and a medium of exchange N store of value a way of transferring purchasing power from the present to the future; one of the functions of money N unit of account the measure in which prices and other accounting records are recorded; one of the functions of money N medium of exchange the item widely accepted in transactions for goods and services; one of the functions of money The Types of Money N fiat money money that is not intrinsically useful and is valued only because it is used as money N commodity money money that is intrinsically useful and would be valued even if it did not serve as money N gold standard a monetary system in which gold serves as money or in which all money is convertible into gold How the Quantity of Money is Controlled N the quantity of money supplied in an economy is called the money supply N in a system of commodity money, the money supply is the quantity of that commodity N in an economy that uses fiat money, the government controls the supply of money as they print the money N monetary policy the central banks choice regarding the supply of money N central bank the institution responsible for the conduct of monetary policy, such as the Bank of Canada in Canada N Bank of Canada the central bank of Canada N open-market operations purchase or sale of government bonds by CB for purpose of increasing or decreasing money supply How the Quantity of Money is Measured N because money is the stock of assets used for transactions, the quantity of money is the quantity of those assets N currency the sum of outstanding paper money and coins N demand deposit assets that are held in banks and can be used on demand to make transactions, such as chequing accounts N demand deposits are added to currency when measuring the quantity of money Symbol Assets Included B Currency plus chartered bank deposits at the Bank of Canada M1 Sum of currency in circulation, demand deposits, and other chequing deposits at chartered banks M2 Sum of M1 plus personal savings deposits and non-personal notice deposits at chartered banks M2+ Sum of M2 plus all deposits and shares at trust companies, mortgage loan companies, credit unions, and Caisses Populaires M3 Sum of M2 plus fixed-term deposits of firms at chartered banks 4.2
More Less

Related notes for MGEB06H3

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.