Starter

What is a union?Name three kinds of businesses.What is a stockholder?Why would someone choose to go on

strike against their employer?

8.08/8.09

Money- Spending, Borrowing, and Investing

Money

Before money, people would barter (trade) Money has three functions:

It is a medium of exchange (used in trading) It is a store of value (a place to hold wealth) It serves as a measure of value

Types of moneyCoins: metal Currency: both coins and paper

Money has value because people accept it

Spending, borrowing, and investing

Demand accounts- (Checking); money can be gotten on demand- checks, debit cards

Credit cards- people use credit to buy goods. Time deposits: certificate of deposits (CD)

CDs: people put their money in and must keep it there for a specific amount of time.

The Financial System

Financial institutionsCommercial banks: loan money for interest

and pay interest on money kept for peopleSavings and loans: similar to banksCredit Unions: open to members who

sponsor them: State Employees Credit Union

Safeguards

Federal Deposit Insurance Corporation (FDIC) Insures people bank accounts up to

$250,000.Created after the Great Depression

People lost everything

Stocks, bonds, and mutual funds

StocksCan be risky investments. You can lose

everything you put in but you could also make a lot of money.

Mutual fundsPools money from many investors and buys

a range of stocks. Money is more spread out.

Bonds- loans to a company or the government.

Insurance

Insurance is used to help protect something of valueLife insuranceHealth/medical insuranceLiability: protects from claims arising from

injuriesComprehension: covers a much wider range

of items

8.09 The Federal Reserve System

The Federal Reserve: The central bank of the United States

Banks borrow money from the “Fed” The US is divided into 12 Federal Reserve

districts Formed in 1913 Controlled by the Board of Governors (7

members appointed by the President and confirmed by the Senate)

One member in chosen as the chairman

What does the Fed do?

It deals with banking regulations and consumer creditOversees large banksEnforces laws that deal with consumer

borrowingHolds the government’s moneySells US bondsManages the nation’s currency (replaces if

necessary)

Monetary policy

The Fed controls the supply of money into the economy and the cost of borrowing money (interest rates)

How does it control the supply of moneyDiscount rate- how much interest banks payControls banks reserves- how much money

a bank must keep in the Fed