Textbook Notes (368,844)
Canada (162,200)
RSM100Y1 (431)
Chapter 1


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Rotman Commerce
Michael Szlachta

RSM chapter 18 Money: a portable, divisible, durable and stable object generally accepted by people as payment for goods and services Portability: currency is lightweight and easy to handle Divisibility: currency is easily divisible into smaller parts with fixed values for each unit, eg: dollars can be changed to 10 dimes, 20nckels, and 100 pennies. It is easy to match units of money with the value of all goods Durability: currency does not spoil, it does not die, and if it wears out, it can be replaced with new coins or paper money Stability: while the value of the paper money we use today has fluctuated over the years, it is more stable than others Function of money: Barter economy: one in which goods is exchanged directly for one another. The barter economy is inefficient compared to money economy Medium of exchange: we use money as a way of buying and selling things Store of value: money can be used for future purchases and therefore stores values Unit of account: money lets us measure the relative values of goods and services M-1, counts only the most liquid forms of money-currency and demand deposits, (chequing accounts) in banks Currency: paper money and coins issued by government This note is legal tender, the law requires a creditor to accept it in payment of a debt. Illegal tender (counterfeiting) has been a problem for many years, new technologies like scanners and color copiers allow it to make real-looking bills rather easily. Cheque: an order instructing the bank to pay a given sum to a specified person or firm, it allows buyers to make large purchases without having to carry large amounts of cash Demand deposits: money in chequing accounts, counted as M-1 because such funds may be withdrawn at any time without notice M-2 everything in the M-1 money supply plus savings deposits, time deposits, and money market mutual funds, M-2 accounts for nearly all of the nations money supply. Time deposits: a deposit that requires prior notice to make a withdrawal cannot be transferred to others by Cheque; time deposits pay higher interest rates. Money market mutual funds: funds operated by investment companies that bring together pools of assets from many investors, the fund buys a collection of short-term, low-risk financial securities. These funds have high payoffs. Credit cards, has become a major factor in the purchase of consumer goods in Canada. Plastic money is actually a money substitute; they serve as a temporary medium of exchange but are not a store of value. Credit cards are big business for two reasons: 1 it are quite convenient for consumers 2 they are extremely profitable for issuing companies because of fees they collect, annual fees or interest on unpaid balances; merchants also pay fees to card issuers Each time a card is used, the banks receive an interchange fee, which is a percentage of the purchase value of the transaction; the banks used these fees to offset costs they incur with loyalty and points programs Credit-card fraud is an increasing concern for both consumers and retailers www.notesolution.com
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