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CHAPTER 10 REVIEW.docx

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Department
Economics
Course
ECO1102
Professor
Serge Nadeau
Semester
Fall

Description
Chapter 10 Money and Prices in the Long Run The Meaning of Money • Money: the set of assets in an economy that people regularly use to buy goods and services from other people The Functions of Money 1. Medium of exchange: buyers give to sellers in exchange for goods/services 2. Unit of account: Yardstick used to post prices 3. Store of Value: an item that people can use to transfer purchasing power from present to future The Kinds of Money • Commodity Money: money that takes the form of a commodity with intrinsic value • Fiat money: money that is declared money by decree of government with no intrinsic value Money in the Canadian Economy • Currency (coins and bills) + Demand deposits = Money Stock ( M1+ , M2) The Bank of Canada The Bank of Canada Act • The Bank of Canada is Canada’s central bank(to regulate quantity of money in economy) • Bank of Canada established in 1935 and nationalized in 1938 • Managed by a board of directors ; Governor, senior deputy governor 12 directors Therefore, controlled by government theoretically but Bank of Canada acts independently • The Bank of Canada has 4 jobs : 1) Issue currency 2) Act as a banker to commercial banks 3) Act as a banker to government
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