Bank of Canada Week 8

What is a central bank a central bank is a government

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Unformatted text preview: the bank. History of Banking •  The problem with FracIonal Reserve Banking is that if people lose faith in the bank and try to redeem their notes all at once, the bank is unable to pay. •  This is because the actual wealth the bank controls is not stored in one physical locaIon, but is dispersed throughout the various borrowers. •  If everyone tries to get their money out at once, this situaIon is called a bank run. The Bank Run •  hWp:// v=qu2uJWSZkck The History of Banking •  In order to protect from this type of occurrence, governments began to create central banks. What is a central bank? •  A central bank is a government created public insItuIon that: –  Issues currency –  Regulates money supply –  Controls interest rates –  Has supervisory po...
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This note was uploaded on 01/26/2014 for the course LAPS ADMS 1010 taught by Professor D.jurkowski during the Winter '10 term at York University.

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