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Chapter 10 Money and Banking

Money and Banking. Section 1 Money is anything that serves as a medium of exchange, a unit of account and a store of value

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Page 1: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

Chapter 10Money and Banking

Page 2: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

Chapter 10Section 1

Page 3: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

Money is anything that serves as a medium of exchange, a unit of account and a store of value

What is Money?

Page 4: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

1) Medium of exchange- anything that is used to determine value during the exchange of goods and services

2) Unit of account- a means of comparing the values of goods and services

3) Store of value- something that keeps its value if it is stored rather than used

The Three Uses of Money

Page 5: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

The coins and paper bills used as money in a society are called currency.

What is Currency?

Page 6: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

1) Durability- Objects used as money must withstand wear and tear

2) Probability- Easy to carry around and transfer

3) Divisibility- Easily divided into smaller amounts

6 Characteristics of Money

Page 7: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

4) Uniformity- all units of money must be identical

5) Limited Supply- Federal Reserve System controls supply of money in circulation

6) Acceptability- everyone in economy must be able to exchange the objects that serve as money for goods and services

6 Characteristics of Money

Page 8: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

Chapter 10Section 2

Page 9: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

In 1913,the Federal Reserve System Act established the Federal Reserve System. The Fed is the nations central bank that creates national currency called Federal Reserve Notes.

History of American Banking

Page 10: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

After the Great Depression, the Federal Deposit Insurance Corporation (FDIC) was created to instill trust in banking system. Today the FDIC insures customer deposits up to 250,000 if a bank fails.

History of American Banking

Page 11: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

Chapter 10Section 3

Page 12: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

The money supply is all the money available in the U.S. economy.

Measuring the Money Supply

Page 13: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

Banks perform many functions and offer many services to consumers

1) Store money- its safe and convenient 2) Credit Cards- cards entitling their holders

to buy goods and services based on the card holders promise to pay

Banking Services

Page 14: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

3) Saving money- the most common options are:◦ Savings accounts◦ Checking accounts◦ Money Market Accounts◦ Certificates of Deposits (CDs)

Banking Services

Page 15: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

4) Loans- Make loans to help new businesses and help established businesses' grow

5) Mortgages- a specific loan used to purchase real estate

Banking Services

Page 16: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

Banks make money of interest rates they receive from consumers who have taken loans

Interest is the price paid on the use of borrowed money

How Banks Make a Profit

Page 17: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

The rise of computers in banking as increased dramatically

Automated Teller Machines (ATM)- can deposit, withdraw cash and obtain account information

Debit Cards- used to withdraw money from checking account

Electronic Banking

Page 18: Money and Banking. Section 1  Money is anything that serves as a medium of exchange, a unit of account and a store of value

Automatic Clearing Houses (ACH)- transfer funds from customers’ accounts into creditors’ accounts

Home Banking- can check balances or make transfers from home computer

Store Value Cards- have magnetic strips or computer chips with account balance information

Electronic Banking