ECON 203 Introduction to Macroeconomics Midterm 2
Covers material that will be on Midterm 2 Chapter 9 to 13
2025 July exam study guide Concordia University
,Chapt Subje Explanation
er c t
11.1 The What is the function Money:
Nature - Medium of exchange (cigarettes being
of money used as exchanged in prison is money)
- Stores of Value
- Unit of Account (teaching class 100$,
apple 1$, unit of account is what relates
the two, $$$)
- Metallic money (value of metal)
- Milling/Debasing currency
Gresham’s law:
- Spending bad money, keeping good money.
I.E, Silver coins vs new cheaper coins. People
will keep silver and spend Cheap.
Goldsmiths (origine of bank):
- People let these people keep their gold.
- They were given bank notes, which said how
much gold they had, it could be used to buy
things.
Modern Money:
- Fiat Money: money no longer backed by
gold; society gives it value.
- Deposit money: Money held in banks.
Banks creating money:
- When banks have more deposits than
money they have in reserve
Money Supply:
- Money in bank
- Money in cash
Money Measures (aggregates)
- M0 = Currency and cash reserves
- M1+ = Physical money and cash +
Demand deposit + travellers checks
- M2 = M1+ + Personal Savings + Notice
deposits Dabsemetnbythe rulling authorities:
- More money than the money supply so
inflation
11.2 The 1. Central Bank (Bank of Canada)
Canadia - Started March 11, 1935
n - Designed from political influence.
Banking - Joint responsibility
system - They print the money (money supply)
- Banker of commercial Banks, of federal gov.
2. Financial intermediaries (commercial
banks)
100% reserve banking
, - Bank keep 100% of deposits on
reserve (they don’t loan it out)
Fractional-Reserve Banking:
- Banks keep less than 100% on reserve
(they loan out) (creating money)
Reserve ratio:
- The % that is kept in reserve.
- Ex. I put 30$ in bank, they reserve 3$, 3/10
= 10% reserve ratio
Target Reserve ratio= Target
reserve/Total deposide
Targer reserve= Actual reserve – Excess
reserve Excess reserve = Actual – Target
A banker can lend when they have
sxeccess and borrow when they don’t
Total Depsoites =
reserves/reserve ratio Balance
Sheet During the Pandemic: Store
of value
Owner’s Investment Percentage=(Total
Liabilities Capital)×100
Money multiplyer = 1/reservratio
How It Was Calculated:
1. Total Change in Reserves:
Total Reserves=Reserve Ratio×Total
Deposits\ text{Total Reserves} = \
text{Reserve Ratio} \ times \
text{Total
Deposits}Total Reserves=Reserve
Ratio×Total De posits
=0.08×31,250=2,500= 0.08 \times
31,250
= 2,500=0.08×31,250=2,500
2. Total Change in Loans:
Total Loans=Total Deposits−Total
Reserves\ text{Total Loans} = \
text{Total Deposits} - \ text{Total
Reserves}Total Loans=Total
Deposits−Total Reser ves
=31,250−2,500=28,750= 31,250 - 2,500
=
28,750=31,250−2,500=28,750
Covers material that will be on Midterm 2 Chapter 9 to 13
2025 July exam study guide Concordia University
,Chapt Subje Explanation
er c t
11.1 The What is the function Money:
Nature - Medium of exchange (cigarettes being
of money used as exchanged in prison is money)
- Stores of Value
- Unit of Account (teaching class 100$,
apple 1$, unit of account is what relates
the two, $$$)
- Metallic money (value of metal)
- Milling/Debasing currency
Gresham’s law:
- Spending bad money, keeping good money.
I.E, Silver coins vs new cheaper coins. People
will keep silver and spend Cheap.
Goldsmiths (origine of bank):
- People let these people keep their gold.
- They were given bank notes, which said how
much gold they had, it could be used to buy
things.
Modern Money:
- Fiat Money: money no longer backed by
gold; society gives it value.
- Deposit money: Money held in banks.
Banks creating money:
- When banks have more deposits than
money they have in reserve
Money Supply:
- Money in bank
- Money in cash
Money Measures (aggregates)
- M0 = Currency and cash reserves
- M1+ = Physical money and cash +
Demand deposit + travellers checks
- M2 = M1+ + Personal Savings + Notice
deposits Dabsemetnbythe rulling authorities:
- More money than the money supply so
inflation
11.2 The 1. Central Bank (Bank of Canada)
Canadia - Started March 11, 1935
n - Designed from political influence.
Banking - Joint responsibility
system - They print the money (money supply)
- Banker of commercial Banks, of federal gov.
2. Financial intermediaries (commercial
banks)
100% reserve banking
, - Bank keep 100% of deposits on
reserve (they don’t loan it out)
Fractional-Reserve Banking:
- Banks keep less than 100% on reserve
(they loan out) (creating money)
Reserve ratio:
- The % that is kept in reserve.
- Ex. I put 30$ in bank, they reserve 3$, 3/10
= 10% reserve ratio
Target Reserve ratio= Target
reserve/Total deposide
Targer reserve= Actual reserve – Excess
reserve Excess reserve = Actual – Target
A banker can lend when they have
sxeccess and borrow when they don’t
Total Depsoites =
reserves/reserve ratio Balance
Sheet During the Pandemic: Store
of value
Owner’s Investment Percentage=(Total
Liabilities Capital)×100
Money multiplyer = 1/reservratio
How It Was Calculated:
1. Total Change in Reserves:
Total Reserves=Reserve Ratio×Total
Deposits\ text{Total Reserves} = \
text{Reserve Ratio} \ times \
text{Total
Deposits}Total Reserves=Reserve
Ratio×Total De posits
=0.08×31,250=2,500= 0.08 \times
31,250
= 2,500=0.08×31,250=2,500
2. Total Change in Loans:
Total Loans=Total Deposits−Total
Reserves\ text{Total Loans} = \
text{Total Deposits} - \ text{Total
Reserves}Total Loans=Total
Deposits−Total Reser ves
=31,250−2,500=28,750= 31,250 - 2,500
=
28,750=31,250−2,500=28,750
