Chapter 12 introduce to the money and banking. In this chapter you will learn: The definition and function of money, what constitutes the supply of money, what backs Canada’s money supply, about the structure of the Canadian financial system.
Money & Banking Chapter 12 SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 In this chapter you will learn The definition and function of money What constitutes the supply of money What backs Canada’s money supply About the structure of the Canadian financial system © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 Chapter 12 Topics The Functions of Money The Supply of Money What “Backs” the Money Supply? The Canadian Banking System Recent Developments in Money & Banking © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 The Functions of Money Medium of exchange © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 The Functions of Money Medium of exchange Unit of account © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 The Functions of Money Medium of exchange Unit of account Store of value © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 Chapter 12 Topics The Functions of Money The Supply of Money What “Backs” the Money Supply? The Canadian Banking System Recent Developments in Money & Banking © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 The Supply of Money Table 12-1 Currency (coins & paper money) plus Demand deposits equals M1 109.6 December, 2000 (billions of dollars) © 2002 McGraw-Hill Ryerson Ltd M1 Macroeconomics, Chapter 12 The Supply of Money Currency: Coins + Paper Money • token money • Bank of Canada notes Demand Deposits Institutions That Offer Demand Deposits • trust companies, caisses populaires, credit unions © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 The Supply of Money Table 12-1 Currency (coins & paper money) M1 plus Demand deposits 109.6 equals M1 plus Personal savings deposits, plus Non-personal notice deposits equals M2 M2 500.1 December, 2000 © 2002 McGraw-Hill Ryerson Ltd (billions of dollars) Macroeconomics, Chapter 12 10 What “Backs” the Money Supply? Money & Prices NOTES: Reciprocal relationship • The Purchasing Power of the Dollar between the price level and the value of the dollar D © 2002 McGraw-Hill Ryerson Ltd = P Macroeconomics, Chapter 12 16 What “Backs” the Money Supply? Money & Prices • The Purchasing Power of the Dollar • Inflation & Acceptability Stabilization of Money’s Value • requires appropriate fiscal & monetary policy © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 17 Chapter 12 Topics The Functions of Money The Supply of Money What “Backs” the Money Supply? The Canadian Banking System Recent Developments in Money & Banking © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 18 The Canadian Banking System Evolution of the Canadian Banking System Present Structure • the big six • the largest Canadian bank is 55th in the world © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 19 GLOBAL PERSPECTIVE 12.1 Assets (U.S $ billions) Deutsche Bank (Germany) Bank of Tokyo-Mitsubishi (Japan) Citigroup (U.S.) BNP Paribas (France) Bank of America (U.S.) UBS (Switzerland) HSBC Holdings (U.K./Hong Kong) Fuji Bank (Japan) Bayerische Hypo Bank (Germany) Sumitomo Bank (Japan) Canadian Imperial Bank of Commerce © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 $955.6 726.3 716.9 703.1 632.6 616.8 601.9 561.3 559.9 519.2 176.2 20 Table 12-2 The Balance Sheet of Canadian Chartered Banks March 2001 ($ Billions) Assets Liabilities Reserves Loans 0.5 Demand deposits 62.1 617.4 Savings deposits 282.7 Gov’t of Canada securities 77.2 Term deposits Foreign-currency assets 33.0 Foreign-currency liabilities 171.6 67.1 Other 217.2 Other 361.8 Total 945.3 Total 945.3 © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 21 The Canadian Banking System Making Loans Other Financial Intermediaries © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 22 The Canadian Banking System Financial Intermediaries D ep osi ts Deposits s t i s o p e D © 2002 McGraw-Hill Ryerson Ltd s n a Lo Loans Loan s Macroeconomics, Chapter 12 23 The Canadian Banking System Making Loans Other Financial Intermediaries Cheque Clearing © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 24 Chapter 12 Topics The Functions of Money The Supply of Money What “Backs” the Money Supply? The Canadian Banking System Recent Developments in Money & Banking © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 25 Recent Developments in Money & Banking Expansion of Services © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 26 Recent Developments in Money & Banking Expansion of Services Globalization of Financial Markets © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 27 Recent Developments in Money & Banking Expansion of Services Globalization of Financial Markets Electronic Transactions © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 28 Chapter 12 Topics The Functions of Money The Supply of Money What “Backs” the Money Supply? The Canadian Banking System Recent Developments in Money & Banking © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 29 Coming up next How Banks Create Money Chapter 13 © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 30 ... in Money & Banking © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 25 Recent Developments in Money & Banking Expansion of Services © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter. .. Developments in Money & Banking © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12 29 Coming up next How Banks Create Money Chapter 13 © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12... Functions of Money The Supply of Money What “Backs” the Money Supply? The Canadian Banking System Recent Developments in Money & Banking © 2002 McGraw-Hill Ryerson Ltd Macroeconomics, Chapter 12