1. Banking

2. Standards Standard 10 – Students will understand that: institutions evolve in market economies to help individuals and groups accomplish their goals. Banks, labor unions, corporations, legal systems, and not-for- profit organizations are examples of important institutions. A different kind of institution, clearly defined and well enforced property rights, is essential to a market economy

3. Standards Standard 11 – Students will understand that: money makes it easier to trade, borrow, save, invest, and compare the value of goods and services

4. The Federal Reserve Act of 1913 The Federal Reserve System, often referred to as “the Fed,” is a group of 12 regional, independent banks. Initially the Federal Reserve System did not work well because the actions of one regional bank would counteract the actions of another. A Stronger Fed In 1935, Congress adjusted the Federal Reserve structure so that the system could respond more effectively to crises. Today’s Fed has more centralized powers so that regional banks can work together while still representing their own concerns.

5. Glass-Steagall Act (1933) regulated the banks (2 Dems) Repealed by the Depository and Monetary Control Act (1980) Gramm-Leach-Bliley Act (1999) allowed banks to own other financial companies (3 Reps) Proprietary Trading When a bank uses their money to make trades – they get to keep the profit - very risky

6. What’s It Like Living in a Barter Economy? –A barter economy is an economy in which people trade goods and services instead of money. –Living in a barter economy is difficult because many of the people you want to trade with don’t want to trade with you. –Transaction costs are any costs associated with the time and effort needed to search out, negotiate, and complete an exchange. –Reducing transaction costs would make trading easier.

7. Entrepreneur has ideas Banks People make money

8. Money Money has to have 6 characteristics: 1. Durability – must last a long time 2. Portability – must be able to easily carry it 3. Divisibility – can be divided into smaller denominations 4. Uniformity – the must be a standard value 5. Limited supply – the amount must be regulated 6. Acceptability – everyone must be able to exchange the money at any time

9. Money Commodity money – objects that have value that are used as money ie. salt or cattle Representative money – has value because it can be exchanged for something of value ie. an IOU Fiat money – has value because the government says it has value ie. dollar bill

10. Banks In 2014, 7% of American families were unbanked Mostly Hispanic. Why?

11. Banks The main function of a bank is to act as a clearing house for checks written Most banks are members of the FDIC – Federal Deposit Insurance Corporation, which guarantees deposits up to $250,000 per depositor

13.  Deposits $10m   5% I  $9m Loans   10% I

14. fractional reserve banking is a banking arrangement in which banks hold only a fraction of their deposits and lend out the remainder.

15. Interest on $9M investments @ 10% = $900k Interest paid to customer is $10M @ 5% = - $500k -$500k + -$100k (expenses) = $600k Profit = $300k Liabilities $10M deposits $1M equity Assets $9M $1M Reserves BANK

16. Multiplier Effect –The multiplier effect is created through fractional banking –Still only 1,000 G but the multiplier effect has created 2,710 G BANK AssetsLiabilities 100 G Equity Farmers have 1,000 G Farmers 1000 G 900 G 100 G Workers have 900 G Workers 900 G 810 G 90 G 810 G

17. The Money Supply The money supply is all the money available in the economy M1 represents money that people gain immediately (liquid) – cash, demand deposits, traveler’s cheques M2 represents all of M1 and other assets that are not as easily available, such as money market mutual funds and saving deposits

18. What Are the Three Functions of Money? Money has three major functions. medium of exchange = something accepted as payment for goods and services. ie. When you buy clothes unit of account = a common measurement used to express values. In the United States, many goods and services are expressed in dollars. store of value = something that has the ability to hold value over time. ie. Cash in a piggy bank If prices rise then money declines Money is a good that is accepted as payment (goods = anything that satisfies our wants)

19. Saving and Checking Guide Goal #1 Saving Accounts a) What is a savings account, b) How to make a deposit, c) How to make a withdrawal, d) how to manage a savings account. Goal #2 Checking Accounts a) How to write a check Goal #3 Balancing a Bank Account a) How to balance a checking account

20. Making a deposit or withdrawal a. To put money in your account you will need a deposit slip b. To take money from your account you will need a withdrawal slip c. All transactions should be recorded on a savings account register which will be provided by the bank Bank transactions can take place at a bank or by using an ATM (automated teller machine) Be careful: Keep the PIN number safe Make sure you are alone Most ATMs dispense in $20 increments

21. Making a deposit - To put money in your account you will need a deposit slip

22. Making a deposit This is what the completed form should look like

23. Withdrawal Slip Making a withdrawal - To take money from your account you will need a withdrawal slip

24. This is what the withdrawal form should look like

25. Savings Register This is what a blank savings register looks like It is very important to keep track of all your transactions

26. This is what the savings register should look like

27. A check This is a check

28. Writing a check

29. Check register