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Macroeconomics, 9th Canadian Edition
Macroeconomics, 9/e
Campbell R. McConnell, University of Nebraska, Lincoln
Stanley L. Brue, Pacific Lutheran University
Thomas P. Barbiero, Ryerson University
Money and Banking

Chapter Highlights

CHAPTER 12
  1. Anything that is accepted as (a) a medium of exchange, (b) a unit of monetary account, and (c) a store of value can be used as money.
  2. Money is generally defined as demand deposits plus currency (coins and paper money) in circulation (M1). Demand deposits, the largest component of the money supply, are money because they can be spent by writing cheques against them. Savings, term, and notice deposits—some chequable and some not—are also money and are added to more broadly defined monetary aggregates (M2 and M2+). In our analysis we concentrate on M1 since its components are immediately spendable.
  3. Money is the debts of government and depository institutions (chartered banks, trust companies, and credit unions) and has value because of goods, services, and resources it will command in the market. Maintaining the purchasing power of money depends largely on the government's effectiveness in managing the money supply.
  4. The Canadian banking system is composed of (a) the Bank of Canada and (b) 11 Canadian-owned and 38 foreign- owned chartered banks. The chartered banks of the economy accept money deposits and make loans. The Canadian banking system is concentrated compared to other nations, particularly the United States.
  5. Three recent developments in the Canadian banking system are the proposed bank mergers, the internationalization of banking, and the emergence of the Internet and electronic money, including smart cards.




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