EC140 Chapter Notes - Chapter 27: Commercial Bank, Chapter 27, Reserve Requirement

• School: WLU
• Department: Economics
• Course: EC140
• Professor: Ken Jackson

Document Summary

The canadian banking system: central bank: a bank that acts as banker to the commercial banking system and often to the government as well. Usually a government-owned institution that is the sole money-issuing authority. The creation of deposit money: new deposit a deposit of cash that is new to the commercial banking system. If v is the target reserve ratio, a new deposit to the banking system will increase the total amount of deposits by 1/v times the new deposit: change in deposits = change in reserves / v. Excess reserves and cash drains: deposit creation depends on the decision of the bankers. Kinds of deposits: money supply: the total quantity of money in an economy at a point in time. Also called the supply of money: money supply = currency + bank deposits, term deposit: an interest-earning bank deposit, subject to notice before withdrawal.