M O N E Y, B A N K I N G A N D M O N E TA R Y P O L I C Y

E C O N O M I C S C I A 4 U

all images pixabay.com and flickr

H I S T O R Y

• Barter and the “coincidence of needs”

• Commodity money

• Coinage

• Paper Money

C E N T R A L B A N K S

• Fractional Reserve Banking

• The Gold Standard

• Fiat Money

• A M E D I U M O F E X C H A N G E

• A M E A S U R E O F VA L U E

• A S T O R E O F VA L U E

W H A T I S M O N E Y ?

G O O D C U R R E N C Y

• Portable

• Durable

• Easily Divided

• Retains Value/Stable

• Widely Accepted

• Scarce

M E A S U R I N G T H E M O N E Y S U P P LY

• The total amount of cash in circulation + bank deposits

• Types of Deposits:

1. Demand Deposits (chequing, savings and and current accounts)

2. Term Deposits 3. Notice Accounts 4. Money Market Mutual Funds

T H E M O N E Y S U P P LY

• M1: cash in circulation and chequing and current deposits

• M2: M1 + all demand deposit accounts

• M2 ++: M2 and all deposits and non-bank, deposit taking institutions, money market mutual funds

• M3: M2++ and large term deposits

T H E F I N A N C I A L S Y S T E M

• Deposit-taking and Lending Institutions (chartered banks, credit unions, trust companies, mortgage companies)

• Insurance Companies and Pension Funds

• Investment Dealers, Finance Companies, Sales and Consumer Loans

T H E C A N A D I A N S Y S T E M

• The Branch Banking Model: few banks with many branches (The Canadian/British model)

• The US model: many banks with few branches

• Which has been more successful? What do you base this on?

T H E C H A R T E R E D B A N K S

• Banks established by a charter passed by the federal parliament

• How many does Canada currently have?

flickr.com