Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
Leverage Money multiplier Monetary base Near-moneys Bank run Commodity money Commercial bank Deposit switching Investment bank Overnight funds market Commodity-backed money Reserve requirements Vicious cycle of deleveraging Discount rate Overnight rate Target for the overnight rate Capital requirements Deposit insurance Bank reserves Money supply Bank rate Open-market operation Unit of account Fiat money Excess reserves Balance sheet effect Monetary aggregate Money Store of value Chequeable (or demand) deposits Currency in circulation Desired (or voluntary) reserve ratio Medium of exchange T-account Sub-prime lending Central bank Securitization Reserve ratio | an asset that individuals acquire for the purpose of trading for goods and services rather than for their own consumption. any asset that can easily be used to purchase goods and services. rules set by the central bank that determine the minimum reserve ratio for banks. an overall measure of the money supply. The most common monetary aggregates in Canada range from M1, the narrowest category (cash and all chequeable deposits at chartered banks), to M3, the broadest category (cash, all deposits in financial institutions, and money market funds). currency held by banks in their vaults plus their deposits at the Bank of Canada. an institution that oversees and regulates the banking system and controls the monetary base. the pooling of loans and mortgages made by a financial institution and the sale of shares in such a pool to other investors. a bank’s reserves over and above its desired (or voluntary) reserve ratio. a bank that trades in financial assets and is not covered by deposit insurance. a medium of exchange that has no intrinsic value whose ultimate value is guaranteed by a promise that it can be converted into valuable goods on demand. government rules imposed on a bank to ensure the bank holds more assets than the value of its deposits, thus reducing the possibility of a bank run. the reduction in a firm’s net worth from falling asset prices. a simple tool that summarizes a business’s financial position by showing, in a single table, the business’s assets and liabilities, with assets on the left and liabilities and equity on the right. a medium of exchange whose value derives entirely from its official status as a means of payment. the ratio of the money supply to the monetary base. describes the sequence of events that takes place when a firm’s asset sales to cover losses produce negative balance sheet effects on other firms and force creditors to call in their loans, forcing sales of more assets and causing further declines in asset prices. the total value of financial assets in the economy that are considered money. bank accounts on which people can write cheques. a medium of exchange that is a good, normally gold or silver, that has intrinsic value in other uses. lending to homebuyers who don’t meet the usual criteria for borrowing. the degree to which a financial institution is financing its investments with borrowed funds. a measure used to set prices and make economic calculations. actual cash held by the public. an asset that is a means of holding purchasing power over time. the shifting of government deposits between the Bank of Canada and the commercial banks. It is a major tool used by the Bank of Canada in its day-to-day operations. the purchase or sale of assets by a central bank. For the Bank of Canada, normally these assets are Government of Canada bonds, but they may also be foreign exchange. a bank that accepts deposits and is covered by deposit insurance. the rate of interest a central bank, such as the Bank of Canada, charges on loans to banks; also referred to as the bank rate. the fraction of bank deposits that a bank holds as reserves. In Canada, banks maintain whatever reserve ratio they think is appropriate to avoid running out of cash. the Bank of Canada’s official key policy interest rate. the sum of currency in circulation and bank reserves. financial assets that can’t be directly used as a medium of exchange but can be readily converted into cash or chequeable deposits. a phenomenon in which many of a bank’s depositors try to withdraw their funds due to fears of a bank failure. a guarantee that a bank’s depositors will be paid even if the bank can’t come up with the funds, up to a maximum amount per account. a financial market in which financial institutions, such as banks that are short of reserves can borrow funds from banks with excess reserves. the fraction of bank deposits that banks want to hold as reserves. the interest rate determined in the overnight funds market. the rate of interest a central bank charges on loans to banks. In many countries, this rate of interest is known as the discount rate. |