ECN 204 Lecture Notes - Lecture 8: Divisor, Excess Reserves, Demand Deposit
5 Dec 2015
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Document Summary
Money: anything that is generally accepted as a payment in exchange for goods and services. Has purchasing power and liquidity (ease in which money can be converted into goods and services: 2. Functions of money: medium of exchange, measure of value, standard unit of account, store of value. Characteristics of good money: durable, portable, divisible, easily recognizable, relatively scarce, hard to duplicate. Basic, intrinsic value as a commodity: token/ fiat money. Little or no value on its own. Face value of coins is generally greater than the metallic money. M1 (narrow) = cash in circulation (outside the banks) + demand deposits (chequing accounts) M2 (broader) = m1 + savings deposits (savings accounts) Banks: financial intermediaries which accept deposits (liabilities) and give loans (assets) Interest rate differential: spread: unit banking: small individually owned banks with a few branches. Usa: branch banking: a few big banks with many braches. At least 75% shares have to be owned by canadians.
