Money and Financial Institutions CHAPTER 12 YAYYYY!! NOTES NOTES NOTES!

POST-IT NOTE #1: Write the name of something you purchased in the last week and who purchased the item for you. POST-IT NOTE #2: If the money did not exist, how would you pay for these items?

Money and Banking CHAPTER 12.1

The Purpose of Money  Enables people and businesses to buy and sell goods/services.  A standard of value and a means of exchange or payment

3 Functions of Money  Medium of Exchange  Standard of Value  Store of Value  Pages

The Functions of Banks  Storing Money  Transferring Money  Lending Money

Storing Money  Bank Account  Deposit  Withdrawal  Interest

Transferring Money  Electronic Funds Transfer  Direct Deposit

Lending Money  Primary way that banks generate a profit.  Collateral  Figure 12.1 – Draw in notes

Other Financial Services  Safe-deposit box  Credit cards  Money management

Extending Activity  In your notes, write down the name of the bank that your parents or family members use.  Using your iPad, go to the website of that bank. What services does that bank offer families, businesses, and students? See what you can find – be prepared to share.

Types of Financial Institutions CHAPTER 12.2

Financial Institutions 1. Operate on state, national, and international levels. 2. Strict rules to start 3. Charter needed 4. In the US – 3 main types of banks

Commercial Banks 1. Majority of banks 2. Wide range of financial services 3. ‘Full-Service’ banks 4. Serve individuals and businesses 5. Charge interest

Savings and Loan 1. Hold money in high interest accounts 2. Originally for mortgage loans 3. Purpose – encourage people to start saving for home or business , allowed to charge more interest 1. Late 1980s, majority failed 5. Now, very similar to commercial banks.

Credit Unions  Not-for-profit banks  Set up by customers for use  Credit cards, checking accounts, low interest loans, high interest savings.  Many also pay interest on checking

Other Financial Institutions

1. Mortgage a. Other financial institutions b. Offered at other banks as well c. Provides loans for buying a home

2. Finance Companies a. Other financial institution b. Offer short-term loans to businesses and consumers

3. Insurance Companies a. Other financial institutions b. Provide protection c. Fire, theft, etc. d. Offers loans to businesses and consumers

4. Brokerage Firms a. Other financial institution b. Sells stocks and other investment tools c. Financial Advising

The Federal Reserve System 1. Est Mission – to provide the US with safe, flexible, stable financial system 3. Monitors the money supply 4. The central bank of the US, “The Fed” 5. Contains 12 regional banks (pg 204), 25 bank branches, and about 5,000 member banks 6. Board of Governors

6 Functions of “The Fed” 1. Clearing Checks 2. Acting as the Federal Government’s Fiscal Agent 3. Supervising Member Banks 4. Regulating the Money Supply 5. Setting Reserve Requirements 6. Supplying Paper currency