Banks - Mr.Streeter

System without money
Good or service must be exchanged directly for
 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
Total money supply of a country
 Types of Banks
Banks that receive a charter from the Federal
II. Bank of Nova Scotia
III. Royal Bank
Major Banks in Canada
95% of all M1 Money
Subsidiaries of Foreign Banks
Less impact of Canadian Economy because
they are foreign.
I. Citibank
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
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
Deposits from Customers
Interest an d w/d
Interest from Businesses
<Loans to Borrowers
Fees for Services
Cos t 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