Money Supply in Canada Economics 120.

Slides:



Advertisements
Similar presentations
What is Money Ch 13.
Advertisements

Money and the Banking System
13.1 WHAT IS MONEY? ● money Any items that are regularly used in economic transactions or exchanges and accepted by buyers and sellers.
Principles of MacroEconomics: Econ101
AP Macro Review Unit 4 Financial Sector.
1 of 33 PART V The Core of Macroeconomic Theory © 2012 Pearson Education CHAPTER OUTLINE 25 The Money Supply and the Federal Reserve System An Overview.
MONEY. MONETARY AGGREGATES M0 – base money (cash + deposits of the banks with the central bank) M1 – money, narrow money (cash + demand deposits) M2 –
Chapter 15 Monetary policy
Money, Banking, and the Federal Reserve System
Chapter 15 The Monetary System. Outline oRole of money in the economy oCreation of money oControl of supply of money by the Bank of Canada.
Unit 14 The Federal Reserve The Top Five Concepts
The Bank of Canada Objectives & Functions. The Bank of Canada The Bank is Canada’s central bank established in 1934 as a private enterprise but became.
Money and the Monetary System Outline The definition and functions of money Measuring the money supply Financial institutions The Federal Reserve system.
We just understood the equilibrium and transmission mechanisms of the goods market. Now we will analyze the money market…
Money and Stabilization Policy KW Chapter 30. Money Money is a tool for conducting transactions and, like all tools, is subject to technological advance.
© 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O’Brien, 2e. Fernando & Yvonn Quijano Prepared by: Chapter 13 Money,
Money, Monetary Policy and Economic Stability
Introduction to Economics: Social Issues and Economic Thinking Wendy A. Stock PowerPoint Prepared by Z. Pan CHAPTER 22 MONETARY POLICY AND THE FEDERAL.
 Money’s 3 Functions In Any Economy:  Means of exchange  A store of purchasing power  A measure of value Money and Its Uses.
Chapter 13 Multiple Deposit Creation and the Money Supply Process 1 Dr. Reyadh Faras.
What is Money? Set of assets in the economy that people regularly use to buy goods & services from each other Prevents need for bartering.
13 CHAPTER Money, the Price Level and Inflation © Pearson Education 2012 After studying this chapter you will be able to:  Define money and describe.
AP Macroeconomics Unit 3 The Financial Sector Vocab: Ch. 31/32 Exam Dates: 3/27 and 3/28.
Money and Banking— Monetary Policy Chapter 13. Functions of Money  1. Medium of exchange—used for buying and selling g & s  2. Unit of account—prices.
Chapter 21 Money and Central Banking Introduction to Economics (Combined Version) 5th Edition.
Chapter 15 Money supply Process.
CHAPTER 30 Money, Banking, and the Federal Reserve System PowerPoint® Slides by Can Erbil © 2005 Worth Publishers, all rights reserved.
Principles of Macroeconomics
CHAPTER OUTLINE An Overview of Money What Is Money? Commodity and Fiat Monies Measuring the Supply of Money The Private Banking System How Banks Create.
Monetary Tools. Tools of Monetary Policy  Changing the reserve requirement  Changing the discount rate  Executing open market operations (buying and.
“money, money, money, must be funny -- in a rich man’s world” Abba
How effective is monetary policy as an economic tool?
© 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair Prepared by: Fernando & Yvonn Quijano 23 Chapter The Money Supply.
ECO 104: I NTRODUCTION TO M ACROECONOMICS Lecture 7 Chapter 12: Money, Banking and the Financial System Chapter 13: The Federal Reserve System (selected.
CHAPTER 10 ECONOMICS, MR. VIOLANTI Money, Banking, and the Federal Reserve System.
1 The Federal Reserve System and the Money Supply Process Chaps (9 th edition), Mishkin.
Principles of Macroeconomics Lecture 3 MONEY AND COMMERCIAL BANKS CENTRAL BANKING AND MONETARY POLICY.
What Money Is and Why It’s Important?
Money and Monetary Institutions Chapter 20
The Federal Reserve System and the Money Supply Process
Money Definition M1  Currency: Coins + Paper Money  token money  Bank of Canada notes  Demand Deposits  about 3/4 of M1  Institutions That Offer.
1 Money Creation ©2006 South-Western College Publishing.
Chapter 13 Multiple Deposit Creation and the Money Supply Process 1.
Functions of Money  Medium of Exchange – accepted for goods/services  Measure of Value – single standard used to compare value  Store of Value – provides.
1 “Foundations of Economics” Lecture 4: The Monetary System.
Chapter 14 Presentation 1- Monetary Policy. Ways the Fed Controls the Money Supply 1. Open Market Operations (**Most used) 2. Changing the Reserve Ratio.
How does a change in money supply affect the economy? Relevant reading: Ch 13 Monetary policy.
Chapter 11: Inflation. Inflation A continuous rise of the general price level General price level is measured by the Consumer Price Index (CPI): The weighted.
Money and Banking— Monetary Policy Section 5 Modules
1. Who Creates Monetary Policy? 2. What are the 3 tools of Monetary Policy? 3. What would the Fed want to do to the money supply if there was high unemployment?
Chapter 13-4 The Federal Reserve System. The Federal Reserve  A central bank is an institution that oversees and regulates the banking system and controls.
 What is Money?  Why do we need it?. Money = 1. Purchase of goods and services 2. Personal worth: measurement of wealth and assets.
Money and Banking 31,32,33 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Money Ch.11. Money is used to pay for things How did this happen? Trading – currency Money is anything that is generally acceptable in purchasing goods.
Money and Banking The Federal Reserve and Monetary Policy.
LECTURE 5 Money and Banking. What is Money? Money is a good that is accepted as a medium of exchange in transactions. Other functions of money include:
What Is Money?  Serves ALL the following purposes:  Medium of exchange: accepted as payment for goods and services (and debts).  Store of value: can.
14 The Federal Reserve and Monetary Policy. money market The market for money in which the amount supplied and the amount demanded meet to determine the.
MONEY AND BANKING AP MACRO ECONOMICS. MEANING OF MONEY Money is any asset that can easily be used to purchase goods and services. Money consists of cash.
BY: FAIRUZ CHOWDHURY LECTURER, BRAC BUSINESS SCHOOL.
Unit 4: Money and Monetary Policy 1. 3 Functions of Money 2 1. A Medium of Exchange Money can easily be used to buy goods and services with no complications.
AP Macroeconomics The Money Market. The market where the Fed and the users of money interact thus determining the short- term nominal interest rate (i%).
PRINCIPLES OF ECONOMICS Chapter 27 Money and Banking PowerPoint Image Slideshow.
Chapter 14 Money and Banking.
Interest Rates and Monetary Policy
Econ 202 Lecture 4 The monetary system.
The Monetary System © 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted.
Understanding Money and Banking Asst. Prof. Dr. Serdar AYAN
21 The Monetary System.
29 The Monetary System.
Presentation transcript:

Money Supply in Canada Economics 120

What is money? Medium of exchange Store of value Unit of Account What sellers generally accept and buyers use to pay for goods and services. Store of value An asset that can be used to transport purchasing power form one time period to another. Unit of Account A standard unit that provides a consistent way of quoting prices.

The Bank of Canada is concerned with the amount of money in Canada at any given time. Definition of money supply: reflects total purchasing power available in the country at any given time Coins & paper currency in circulation (money) Chartered bank deposits Demand deposits Savings (notice) deposits

Several Definitions M1(Narrow Money): Currency plus demand deposits M2 (Broad Money): M1 plus notice deposits M3: M2 plus non-personal term deposits and foreign currency deposits of residents booked in Canada

Controlling the Money Supply The Bank of Canada has three policy instruments to control the money supply. Open market operations Transfers of government deposits Bank rate

Open Market Operations Open market operations consist of the purchase and sale by the Bank of Canada of government securities on the open market. The Bank of Canada’s own funds are not part of the money supply so it can increase the money supply by purchasing government securities or decrease the money supply by selling government securities.

Transfers of Gov’t Deposits The BoC can make transfers of government deposits to private banks, giving the banks excess reserves and increasing the money supply through new loans. Similarly the BoC can transfer funds away from private banks to decrease the money supply.

Bank Rate The bank rate is the interest rate that private banks pay to borrow from the Bank of Canada. Although there is little borrowing by banks from the Bank of Canada the bank rate is a signal of monetary policy. A higher bank rate indicates a higher cost to financing a short-fall, so banks increase their reserve ratios thus tightening the money supply.