Economics 1022A/B Lecture Notes - Lecture 6: Credit Union, Monetary Base, Excess Reserves

• School: Western University
• Department: Economics
• Course: Economics 1022A/B
• Professor: Barry Tepperman

Document Summary

Money, banking, and interest rates: medium of exchange. Accepted in exchange for goods and services. Reduces costs of transactions: unit of account. Agreed measure for prices: money- unit of account. Can be held and exchanged at a later date for goods and services. Forms of money: commodity money, fiat money, deposit money. Money in canada: currency, deposits, not money. Valuable in its own right for production or consumption. Problems of cheating on its value, opportunity cost of use: convertible paper money. Paper claim to commodity used as means of payment. Paul dimovski: depository institutions take deposits from households and firms, and make loans to others. Trust and mortgage loan companies: make money by borrowing at low rates and lending at high rates in return provide four main economic services. How banks create money: banks create money (deposits, not currency) by making loans (by lending out excess reserves. Cash in vault + deposits with bank of canada.