1. Money and Banking
Chapter 10

2. Money
Section One

3. Money does not have to be spent immediately
THREE USES OF MONEY
HOW IT FUNCTIONS
BENEFITS
Medium of Exchange
Determines value during the exchange of goods and services
Sell one good and then purchase another rather than trying to trade for what you want
Unit of Account
Compares value of goods and services
You can determine whether a price is a good deal based on similar goods
Store of Value
Keeps value if stored and not used
Money does not have to be spent immediately

4. SUGAR EMERALDS HORSES GOLD COINS SEASHELLS CURRENCY
Copy down the following items. Rank them in terms of their usefulness as money, with 1 being the best and 6 being the worst.
SUGAR
EMERALDS
HORSES
GOLD COINS
SEASHELLS
CURRENCY

5. The 6 Characteristics of Money
Durability: must withstand physical wear and tear that comes with being used over and over.
Portability: must be able to be carried around for daily use.
Divisibility: must be easily divided into smaller denominations.
Uniformity: must be able to be counted and measured accurately
Limited Supply: must be able to control the amount available
Acceptability: people who accept it must be able to use it to get what they want or need

6. For each of the six items listed above, write down which characteristics each one meets. Think as if each one were the ONLY source of money available.
Sugar: Divisibility (ounces, pounds, etc.), Uniformity
Emeralds: Durability, Limited Supply
Horses: NONE
Gold Coins: Durability, Divisibility, Uniformity, Limited Supply, Acceptability
Seashells: None
Currency: All

7. How well do you know U.S. currency?
How many denominations of U.S. paper currency are there? 7 (1, 2, 5, 10, 20, 50, 100)

8. How well do you know U.S. currency?
Who is on the $1 bill? George Washington

9. How well do you know U.S. currency?
Who is on the $2 bill? Thomas Jefferson

10. How well do you know U.S. currency?
Who is on the $5 bill? Abraham Lincoln

11. How well do you know U.S. currency?
Who is on the $10 bill? Alexander Hamilton

12. How well do you know U.S. currency?
Who is on the $20 bill? Andrew Jackson

13. How well do you know U.S. currency?
Who is on the $50 bill? Ulysses S. Grant

14. How well do you know U.S. currency?
Who is on the $100 bill? Benjamin Franklin

15. How well do you know U.S. currency?
How many of the people pictured on U.S. currency never served as president? 2 Alexander Hamilton (First Secretary of the Treasury) Benjamin Franklin (Statesman)

16. How well do you know U.S. currency?
Who is responsible for choosing the portraits on our currency? Secretary of the Treasury

17. How well do you know U.S. currency?
What requirements does the Treasury Department have for someone whose picture is on U.S. Currency? Someone well known Someone who is deceased

18. How well do you know U.S. currency?
The Treasury Department has announced that a new picture is going on our currency in What bill is getting a new face? $10

19. With a group of NO MORE than 4 total people…
You are going to choose a denomination of U.S. currency and replace the image with someone else.
Keep in mind the requirements of the Treasury Department (well known and deceased)
Make sure to include…
Who you are going to replace (give plenty of background information about this person…who are they, why are they famous, etc.)
Who is going to replace them (be sure to thoroughly explain why they deserve to be on the currency more than the person they are replacing)

20. SOURCES OF MONEY’S VALUE (Fill in using p. 246-248)
MEANING
EXAMPLES
Commodity
Objects that have value in themselves and are used for money
Wheat, sheep, etc.
Representative
Does not have value itself, but represents something that does
Gold/silver certificate, gift card
Fiat
Has value because the government has declared it an acceptable means to pay debt
U.S. currency

21. On a clean sheet of paper, answer 6-10 on page 248
On a clean sheet of paper, answer 6-10 on page 248. You do not have to write the questions, but your answers should be in complete sentences.

22. The History of American Banking
Section Two

23. The First Bank of the U.S.
Congress issued a 20 year charter in 1791, and it brought stability to American banking.
Many people feared it would only lend to the rich.
The Second Bank of the U.S.
Congress issued a 20 year charter in 1816.
Restored order to the banking system, but President Jackson vetoed the renewal of the bank’s charter in 1832.

24. Two Advantages of the Gold Standard
It set a definite value for the dollar so people could redeem the value of their paper money at any time.
The government could only issue currency if it had gold to back it up, preventing the government from printing too much.

25. The Federal Reserve System
Created in 1913 and reorganized the national banking system into:
The Federal Reserve System is made up of 12 districts
Federal Reserve Board: appointed by the President and oversee all Federal Reserve Banks
Short-term loans: allow member banks to take out loans to meet short term demands
The Fed issues Federal Reserve Notes, the currency used in the U.S.; allows the Federal Reserve to increase/decrease money supply according to needs.
Federal Deposit Insurance Corporation (FDIC): insures a customer’s deposits up to $250,000 per insured bank.

26. Federal Reserve Districts

27. Banking Today
Section Three

28. Money Supply M1: easily turned into cash (liquid)
M2: cannot be directly used as cash
Cash
Checking accounts (Demand Deposits)
Traveler’s checks
All of M1
Savings accounts
Money market funds

29. Functions of Financial Institutions
Storing Money
Saving Money
Savings Accounts
Money Market Accounts
Certificate of Deposit (CD)
Loans
Mortgages
Credit Cards