Presentation is loading. Please wait.

Presentation is loading. Please wait.

CH 10: Money and the Financial Market. 10A Money What is money? Game.

Similar presentations

Presentation on theme: "CH 10: Money and the Financial Market. 10A Money What is money? Game."— Presentation transcript:

1 CH 10: Money and the Financial Market

2 10A Money What is money? Game

3 10A Money What is money- Anything that a society commonly uses and generally accepts as payments What is legal tender? Commonly used and accepted US Congress approved: all creditors must accept

4 10A Money 3. List the Functions of Money A. Means of Payment: use money (vs. barter) to reduce cost & effort of doing business How is bartering a hindrance to economic growth? Double coincidence of wants Relative price equation N(N-1)/2=# of price combinations B. Measure of Value: yardstick to measure relative value Ex. $500 computer or 5 heads of cattle C. Means of Storing Purchasing Power: products spoil so needed something that could hold power longer. Money retains face value to some extent but subject to spoilage like inflation

5 10A Practice 1. John paid cash for his car 2. That hairspray can costs $1.50 3. I feel better having at least $10 in my wallet A. Means of payment B. means of storing purchasing power C. Measure of value

6 10A Money 4. What are the desirable characteristics of money (rather than another object; beads)? A. Convenience and Portability B. Divisibility C. Durability (paper=18-22 months vs coins=several decades) D. Stability

7 Biblical Discussion Is money evil? Is being wealthy evil? Discuss using scriptural references. Mark 8:36, I Tim. 6:10, Prov. 10:4, Ecc. 5:19…. If we are to give our best efforts to pursue what God values, what are some of those things? Take Away: do not let $ or the things it can buy control our lives.

8 10 A Money 5. Identify 3 different kinds of money A. Commodity $ (ex. Seashells, then progress to rare items like gold or silver.) We use token coins: coins contain a quantity of metal less than face value, a one-ounce $1 coin might not equal a $1 in gold. B. Representative $ (birth of paper money in 15 th and 16 th century. Gold stored with goldsmith who gave deposit receipt. Those with solid reputations allowed to exchange deposit receipt like actual money). C. Fiat Money ($ not backed by gold or something of value) Govt took over storing gold deposits and passed legal tender laws. Forced to accept fiat money. All $ in the USA is fiat $.

9 10B The Financial Market The financial market is a theoretical market. Consists of insurance, investment, thrift and banking companies Purpose: assists households in circulating money (circular flow model pg. 35) Most important: the commercial banks History of Banks: Began in Renaissance Italy- busy marketplace in Florence. Sat on benches called bancos Medici family- Popes Bankers

10 10B Financial Market History of Banking in the US 1. Free banks: unregulated, unsound 2. 1864- National Banking Act with national currency. Resulted in a Dual Banking System of National and State Banks. (See picture pg. 197) Commercial Banks: heavily regulated to insure funds Defined as accepts deposits and makes loans Regulations: charter (authorization to exist), then subject to regulatory agencies. * FDIC insures federal deposits up to a certain amount of money, standard $100,000 Function: accept deposits, offer loans, and provide misc. financial services (i.e. safe deposit box, traveler checks etc.)

11 10B Financial Markets Three kinds of thrifts: 1. Savings and Loans (S&L): collect $ in interest bearing savings accounts and use capital to extend loans usually in home mortgages 2. Mutual Savings 3. Credit Unions: group of people with common interests who pooled savings for lending usually mortgage and checking accounts.

12 Economic Theorist- Milton Friedman Leading economists in the late 19 th century. Strong supported of laissez-faire capitalism and denounced government interference in the marketplace. Won a Nobel Prize in Economics According to Milton Friedman a stable economy depends on the money in circulation. This approach to money is called the monetarist approach. Advocated govt control of the money supply otherwise leave the market alone.

Download ppt "CH 10: Money and the Financial Market. 10A Money What is money? Game."

Similar presentations

Ads by Google