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Money: Defined as any commodity or token that is generally acceptable as a means of payment. This includes currencies, coins, and other forms that can be used for transactions.

Medium of Exchange: One of the primary functions of money that facilitates trade by providing a universally accepted means of exchange.
Not a Function of Money: A measure of liquidity is NOT considered a function of money in the economic sense.

In barter systems, a double coincidence of wants exists when two parties want what the other has, making trade possible without the use of money.

Open Market Operations: The Bank of Canada engages in open market operations through the purchase or sale of government securities to regulate the money supply. When the bank sells securities, its assets and liabilities decrease.
Bank Rate: The interest rate charged by the Bank of Canada on short-term loans to major depository institutions when reserves are low. This rate influences other interest rates in the economy.

Banks can create money by lending out their excess reserves, with the reserve ratio affecting the money multiplier.
For example, if the desired reserve ratio is 0.25, the money multiplier is 4, indicating how many times a deposit can be expanded through repeated loans.

Overnight Loans Rate: Represents the interest charged on loans that large banks extend to each other, a critical determinant of liquidity in the banking system.
Effect of Buying/Selling Bonds: When the Bank of Canada engages in buying government bonds, it increases bank reserves, leading to greater liquidity. Conversely, the sale of government bonds decreases bank reserves.
Interest Rate Adjustments: To lower interest rates, the Bank can purchase government securities, enhancing the money supply and stimulating aggregate demand. Conversely, raising the overnight loans rate can decrease investment and aggregate demand, thus managing inflationary pressures.