Textbook Notes (280,000)
CA (160,000)
Western (10,000)
ECON (600)
Chapter 24

Economics 1022A/B Chapter Notes - Chapter 24: Mortgage Loan, United States Treasury Security, Deposit Account

Course Code
ECON 1022A/B
Jeannie Gillmore

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Money is any commodity or token that is generally acceptable as a means of payment
A means of payment is a way of settling a debt
A medium of exchange is any object that is generally accepted in exchange fro goods and services
Exchanging goods and services directly for other goods and services is called a barter
Unit of account is an agreed measure for stating the prices of goods and services [Dollar]
Money is a store of value in the sense that it can be held and exchanged
The more stable the value of commodity, the better it can act as a store of value and the more useful it
is as money
Currency is known as the notes and coins held by individuals and businesses
Notes and coins inside the bank are not considered currency
Deposits are money because the owner if the deposits can use them to make payments
M1: Currency + chequable deposits [Both held by individuals and businesses] - Money
M2: M1 + all the other deposits - non-chequable deposits and fixed term deposits
Liquidity is the property of being easily converted into a means of payment without loss in value
Cheques are not money because it is a monetary transfer - no new money is formed
A credit card is not a means of payment and it is not money - it is a loan
A depository institution is a financial firm that takes deposits from households and firms
A chartered bank is a private firm allowed to receive deposits and make loans
A credit union is a cooperative organization that receives deposits from and makes loans
A trust and mortgage loan company is a privately owned depository that receives deposits, makes
loans, and acts as a trustee for pension funds and estates
Depository institutions provide services such as cheque clearing, account management, credit cards,
and internet banking, all of which provide income from service fees
Reserves: Notes and coins in a depository’s vault or its deposit account at the Bank of Canada
Liquid assets are Government of Canada Treasury bills and commercial bills
Securities: Government of Canada bonds
Loans: Commitment of funds for an agreed upon period of time
Outstanding balances on credit cards are also considered loans
Depository institutions create liquidity by borrowing short and lending long
Depository institutions lower the cost of borrowing by spreading the cost of activity over many
Bank of Canada is a Canada’s central bank
BofC only deals with a select few clients: including banks, credit unions, causes populaires, trust and
mortgage loan companies, central banks of other countries
BofC is the lender of last resort, which means that it stands ready to make loans when the banking
system is short of reserves
Bof C is the only bank allowed to issue bank notes
Bank of Canada has 2 main assets: Government securities & Loans to Depository institutions
Bank of Canada has 2 main liabilities: Bank of Canada notes & Depository institutions deposits
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