money and banking. section 1 money is anything that serves as a medium of exchange, a unit of...
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Chapter 10Money and Banking
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Chapter 10Section 1
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Money is anything that serves as a medium of exchange, a unit of account and a store of value
What is Money?
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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
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The coins and paper bills used as money in a society are called currency.
What is Currency?
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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
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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
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Chapter 10Section 2
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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
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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
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Chapter 10Section 3
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The money supply is all the money available in the U.S. economy.
Measuring the Money Supply
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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
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3) Saving money- the most common options are:◦ Savings accounts◦ Checking accounts◦ Money Market Accounts◦ Certificates of Deposits (CDs)
Banking Services
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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
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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
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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
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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