 System without money  Good or service must be exchanged directly for another  Find what the other person need  Good has to be equal in value  Can not trade a cow for an acre of land

 1. Medium of Exchange…….Exchange of goods and services for money. We then use the earned money to buy our own goods and services. a. Generally accepted b. Portable (easy to carry) c. Divisble d. Hard to duplicate e. Uniform in value 2. Measure of Value…Money distinguishes the value of different goods 3. Store of Value…..Money stored until needed Value has to remain stable

 Most liquid components of the money supply as it contains cash and assets that can be converted to currency.

 Near Money. Savings deposit, money market, and mutual funds.  Not as liquid as M1

 Assets that are not as liquid as M1 or M2  Combination of M1 and M2, and long term deposits.  Total money supply of a country

 Types of Banks

 Banks that receive a charter from the Federal Government I. BMO II. Bank of Nova Scotia III. Royal Bank IV. CIBC

 Major Banks in Canada  95% of all M1 Money

 Subsidiaries of Foreign Banks  Less impact of Canadian Economy because they are foreign. I. Citibank II. HSBC III. JP Morgan IV. Bank of America

 Serves local communities  Low failure rates

 Founded 1935…Crown Corporation I. Supply the economy with the needed paper money II. Bank for banks III. Chartered Banks have accounts with the Bank of Canada IV. Federal Government uses the bank to help manage its financial Affairs a. revenue b. payment of bills c. sale/redemption of Government bonds

 Home improvements  College tuitions  Business loans  The more loans given, the higher interest rate charged, the more return a bank is able to make to invest.

 Banks have to be smart when lending. Credit ability of each customer. When payment is not made (default) bank loses money and it affect customers.  Very Risky

 Used to buy real estate  15, 25, and 30 year investments

Entering Leaving Deposits from Customers Interest an d w/d Interest from Businesses <Loans to Borrowers Fees for Services Cost of Doing Business

 Trust Companies…….established Provincially/Federally 1. provide management of property and investments 2. same service as regular bank  Mortgage Company……Banks that accept deposits for investment in mortgage  Credit Unions…….Institutions that serve certain industries