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8: Money, Banking and Money Supply

Last updated

Jan 4, 2021
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- 7.9: Exercises for Chapter 7
- 8.1: Money and the functions of money

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Banks are the front line of the financial system. Bank deposits are a form in which people hold their wealth and they are also the main means of payment, making them the main component of the money supply in the economy. Furthermore banks are the major sources of credit for households and businesses, either directly through bank loans or indirectly through the credit card systems they own.

The financial sector provides the important link between and aggregate expenditure and aggregate demand. It is the key to understanding the slope and position of the AD curve. It also creates the framework for central bank monetary policy.

8.1: Money and the functions of money
8.2: Measures of the Canadian money supply
8.3: Banking in Canada today
8.4: Money Created by Banks
Banks create money when they increase their deposit liabilities to pay for the loans they make to customers, or for the financial securities they buy. The public uses the deposit liabilities of the banks as money to make payments or to hold as a store of wealth.
8.5: The monetary base and the money supply
8.6: Key Concepts
8.7: Exercises for Chapter 8

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